What Is a Lien Release and How Is it Used?

A lien is a legal way to secure the payment of a debt.

If a lien has been placed on your property, you will need to obtain a lien release once payment has been made. 

To ensure you get the proper lien release, you should have an understanding of liens, waivers, and releases. This includes knowing the different types of releases that may be appropriate in various circumstances.

Read on to find out the differences between a lien waiver and a lien release, a full and a partial release, and a conditional and an unconditional lien release.

What are liens, waivers, and releases?

Here is what you should know about the differences between liens, waivers, and releases. 

Lien definition

A lien gives a creditor certain rights over the property of a debtor until the debt is paid. 

For instance, a lien can be used to block the sale of a debtor’s property until the debt obligation is fulfilled. If the debtor is unable to pay the debt, the lien holder may be entitled to take possession of the debtor’s property. 

Common types of liens include the following:

• Agricultural lien. Each state has a statute that automatically creates an agricultural lien on a farmer’s property (such as farm equipment or livestock) whenever the farmer takes out certain loans. Many farmers rely on loans to cultivate the next season’s crops or livestock, and an agricultural lien enables lien holders to claim a farmer’s agricultural products if the farmer fails to repay a debt. 
• Child support lien. In some cases, if an individual fails to pay child support, child support agencies can file real property liens against the obligor’s real estate and other personal property.
• Common law lien. Common law liens arise from common law, as opposed to statutes or contracts. For example, an artisan lien helps ensure workers are compensated for improvements made to personal property by granting them a legal claim to the property until they are paid. 
• Contractual lien. As the name suggests, a contractual lien is based on a contract rather than common law or statutes. For example, a mortgage grants the lender a security interest (legal claim to property) in the mortgaged property. 
• Equitable lien. Liens don’t always arise from statutes; courts can require an equitable lien in certain circumstances.
• Legal lien. Common law courts can create a legal lien, which enables creditors to take physical possession of a debtor’s property as collateral for a debt. However, a legal lien holder typically can’t sell the property. The lien holder retains the property as motivation for the debtor to fulfill their debt obligation. 
• Maritime lien. Creditors who provide services to a ship can use a maritime lien to secure their interests. A maritime lien is attached to the property, so even if the ship is sold and the new owner has no knowledge of the lien, the lien can still be enforced. 
• Mechanic’s lien. Sometimes called a materialman's lien, a mechanic’s lien is used by contractors and subcontractors who perform construction work on real property. This may relate to labor and materials provided for constructing a new building or for a project for an addition or repair work. A lien document is filed in the public land records by the contractor, so that anyone doing a title search can find it. The property owner will find it difficult, or impossible, to sell or refinance the property unless the debt is paid and the lien is released by the contractor.
• Mortgage lien. A mortgage lien enables a mortgage lender to foreclose on a mortgaged property if the borrower stops making payments on their home loan. 
• Tax lien. If a property owner doesn’t pay their property taxes, the government can file a tax lien. If the tax lien isn’t paid, the government can authorize the sale of the property. Similarly, if a property owner doesn’t pay their income taxes, the IRS can file a lien. Unpaid IRS tax liens can lead to tax levies, which enable the IRS to take possession of and sell the debtor’s property. 
• Vehicle title lien. Automobile financing lenders can list a vehicle title lien on a vehicle’s title until the loan is paid off. 

Lien release definition

A lien release (also called release of lien) is a document that is filed with government authorities as the official notice that the lien is removed. Once payment has been received, a lien holder has a duty to remove any lien that was filed against the property.

Failure to do so allows the property owner to file a lawsuit against the lien holder to compel the lien's removal.

Waiver definition

A waiver is an intentional relinquishment of a right or privilege. In the context of liens, in some circumstances an individual can waive their right to put a lien on a property. 

It should be noted that a lien release is not the same as a lien waiver. While a release removes an existing lien, a waiver is an agreement that prohibits a party (such as a contractor or supplier) from placing a lien on the property.

It's important to understand that liens are governed by state law, which varies from one state to another. Some states don't permit lien waivers at all.

State law may also dictate the information that needs to be included in a release, and may even have suggested or required release forms. How and when liens may be placed and released may also be governed by the terms of a contract or by courts. 

What is the difference between a full and a partial lien release?

The main difference between a full and a partial lien release is that a full lien release completely revokes a lien on a property, but a partial lien release does not. 

Full lien release

When a lien is filed, it states the amount that is owed to the lien holder. If the stated amount is paid in full, the lien holder should file a full release of the lien. This results in completely removing the lien from the property. Once the lien is released, the property owner is free to do as they wish with the property. 

Partial lien release

With a partial lien release, a lien remains on the property, but for a reduced amount.

For example, a partial lien release is often used with a mechanic’s lien. Sometimes—depending on the terms of the contract—the property owner pays the contractor in installments as stages of the work are completed. As the installment payments are made, the contractor may partially release the lien accordingly. 

Should you use a conditional or an unconditional lien release?

Whether you use a conditional or an unconditional lien release depends on the circumstances surrounding the lien. 

Conditional lien release

A conditional lien release is contingent on the payment clearing. If the check doesn't clear, the lien is reinstated.

For example, if a property owner doesn't want to make the final payment until the lien is released, and the contractor doesn't want to release the lien until the final payment check has cleared, a conditional release of the lien may resolve the situation.

A conditional lien release has the following characteristics:

• States that it is contingent on the payment clearing
• Lists the outstanding balance
• Goes into effect once payment is received

If a property owner tries to sell or mortgage their property, a conditional lien release can let a potential purchaser or lender know that more investigation is needed to determine if the property is free of the lien. 

Unconditional lien release

An unconditional lien release fully removes the lien from the property, with no possibility that it will be reinstated. The type and form of a lien release will vary, depending upon the state's law where the property is, and whether full or partial payment is made.

For example, in California, the property owner can fill out a release and waiver of liens form for a mechanic’s lien. 

An unconditional lien release has the following characteristics:

• Outlines the amount paid up to the date of the release
• Requires the lien holder to remove the lien after signing the release
• Prevents the lien from being reinstated

An unconditional lien release is best for situations involving completed projects where payment has been fulfilled.

FAQs

How long does it take to get a lien release?

The length of time it takes to get a lien release can depend on where you are located and the laws and procedures that apply to the type of lien you have. 

For example, if you want to get a vehicle title lien release in New York, you will need to get the lien holder to provide a notice of release that informs the New York State Department of Motor Vehicles (NY DMV) that you have paid off your loan.

Once you receive the notice from the lien holder, you will need to mail it and required documents and fees to the New York lien release office. After you have submitted the necessary paperwork, you will receive a new title within 45 days. 

How much does a lien release cost?

The cost of a lien release can depend on your location, the type of lien, and the amount you need to pay to fulfill your debt obligations.

For instance, you must pay the remainder of your automobile loan and a $20 fee for a vehicle title lien release in New York. 

Can a lien release be challenged?

Lien releases can be challenged in certain circumstances, including those involving payment disputes, fraud, or inaccuracies in the lien release process. 

Who can put a lien on a piece of property?

The types of parties that typically put liens on property include the following:

• Creditors
• Contractors
• Government agencies
• Lenders
• Suppliers
• Workers

Can a lien holder refuse to release a lien?

A lien holder can refuse to release a lien if the debt hasn’t been repaid, contract terms haven’t been met, or in situations involving legal disputes. However, while the purpose of a lien is to help ensure payment of a debt, the responsibilities of the holder include releasing the lien once the debt has been paid.

Edward A. Haman, J.D. contributed to this article.