Over encumbering Real Estate With A Mortgage
One technique of deterring would be predatory attorneys is to make your real estate appear to be encumbered with liens that would take precedence over any judgment that could be obtained. This page discusses the mechanics, pros and cons of such a maneuver. This page was largely drawn from a discussion with employees of a title and escrow company.
Introduction to Over encumbrance
In order to protect yourself
from being sued, it is sometimes worthwhile to make the property look
encumbered. Say you own a house on Property Street which is worth $155,000, which has a 105K first mortgage lien on it right now,
which makes it look like there is about 50K of equity in it. If there was an
additional lien on it for 50K, to an attorney interested in possibly suing you, it would look like it wasn't
worth pursuing. You would basically have a 3rd
party say that they have lent you $50,000 as a private lender and the
property is being used as collateral just like any other mortgage.
Recording and releasing a Lien
To record a lien on a home, what do you need document wise?
The document needed to record a lien depends on the type of lien it is.
(mechanics lien, tax lien, etc...). We have a typical mortgage document here (a pdf file which is a bit big so don't download it lightly).
For a lien to be placed on the property
certain guidelines have to be followed. Lets say a mechanics lien, you have
a certain timeframe to record your notice of commencement and you have to
get the work done in that timeframe and then you have to wait 30 days after
you expected to get paid before you can file. It is really going to depend
on the type of lien it is.
It has to be
signed by the title holder, correct?
A lien does not need to be signed by the
title holder, in fact many times people have no idea they have a lien on
their property until they go to sell it.
The only requirement to file a lien is that it needs to be signed by the
lien holder and notarized and filed in public record with a legal
description attached.
Mortgages or Deeds of Trust are usually signed by the title holder.
What document is needed for the release of a lien?
You need a Satisfaction or release of lien letter signed by the lien holder
that the debt is paid in full. That should also be filed in public record
with the legal description.
You can get these documents at places like Staples or Office Depot.
In order to prevent someone from trying to commit fraud to have a
lien taken off the notary signature would prove that it was the lien holder
and not someone else. The consensus is that both the lien and release of lien should be notarized. There may be exceptions depending on the type of lien, you would have to research that.
It is important
to have the notary signatures and dates all proper. Remember, notaries have
nothing to do with the document being signed , all they do is notarize a
signature was done by that particular person on that particular day so you
don't have to make any explanation to anyone. I would use an outside notary
that has nothing to do with either of you to make it all above board.
A release of lien or satisfaction can usually be recorded at any time
because you can't guarantee someone will get paid and you can't say sorry
it has been 2 years and they didn't pay you so it has expired. We have many files
when they go to sell that lien is on there but it was paid and we have to
run around and play detective and find the person get the signature and then
get it filed in public record showing it had already been paid.
So a lien could easily be placed fraudulently on real estate?
Yes it is fraud, but the burden will lie with the title holder to prove that
the lien is not correct. This is a lien regarding the home
and not a personal lien.
For example, there is a case in which a supplier says he delivered
double the materials to a home and the homeowner says they didn't. They
have filed a $5000 lien on him, even though he knows this isn't correct it
is up to him through the legal system to have it taken off. It sucks if you
are innocent. Of course, the lien holder won't come forward or cooperate in
any way. So now he has to file papers etc...
Now if you are just trying to make someone's life
miserable for a couple of months then you can have something recorded and
then they have to get it taken off.
You can sit on some documents for a while before they get recorded but you
may be asked to explain the time frame. Maybe by affidavit or something
like that. Again this all depends on the type of lien.
There is no time limit for a document to be recorded is there?
We could
have a lien placed or satisfied today, and not record it for ten years.
What is a personal lien?
A personal lien would be like a credit
card, auto payment, or you were arrested and didn't pay court fees, something
like that. Those can actually sometimes be taken off of the property if it
is homestead property by signing an affidavit. That allows the people to
sell the property free of that particular debt. Taxes and Child Support
even though they are personal usually have to be paid off. You know the
government.
Over encumbering Real Property With A Lien (continued)
