Liens are documents filed against a person or business by creditors who claim they are owed payment for some service or product they provided or by government agencies for failure to pay taxes or fees.
The liens are placed on a piece of property owned by the debtor and allow the creditors to collect what is owed to them if the property is ever sold.
In some cases a creditor can force the sale of a piece of property to collect what is owed, a process called foreclosure on a lien. But these cases require filing a civil lawsuit to force the foreclosure.
There are several different types of liens.
Tax liens are filed by:
- the IRS or the California Franchise Tax Board for failure to pay personal income taxes
- the California Employment Development Department for failure to pay payroll taxes
- other local government agencies such as the county property tax collector or even a municipal garbage collection service
These liens list:
- the person or company that owes the back taxes
- the amount of back taxes owed along with any penalties and interest
- an address for the taxpayer, which is the property on which the lien is being placed
Mechanics liens are filed by contractors or suppliers who say they weren't paid for services performed or goods supplied to a person or company.
These liens list:
- the name of the contractor
- the name of the person for whom the work was done
- the amount owed
- the address where the work was performed
- a description of the work
On all liens, if the person or business that owes money to a taxing agency or other creditor pays the money owed or otherwise settles the dispute, a release of the lien will be filed with the recorder's office (this is sometimes referred to as a cancelation of a lien).
This means the original creditor no longer has a claim on the debtor's property. This sometimes is referred to as removing an encumbrance on a property.
So if you find a lien filed against a person or business, be sure to check if the lien and the debt were subsequently removed with the filing of a release or cancelation of the lien.