What Is Voluntary Lien?

August 25, 2024 3 min read Real Estate Finance Mortgage Property Debt Liens Real Estate

A detailed explanation about voluntary liens, highlighting what they are, how they work, and their implications.

Voluntary Lien: Debt Agreement Recorded by Property Owner

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A voluntary lien is a legal claim or right against a property that the property owner agrees to have recorded, typically to secure a debt. This consent is usually provided in the context of obtaining a loan, most commonly a mortgage.

Key Characteristics of Voluntary Liens

Agreement: Unlike other types of liens, voluntary liens are placed on the property with the property’s owner’s explicit agreement.
Purpose: They are generally used as a security interest for a loan, ensuring that the lender has a claim to the property if the borrower defaults.
Priority: Typically, voluntary liens take priority over subsequent liens that might be recorded against the property.

Types of Voluntary Liens

Mortgages

A mortgage is the most prevalent type of voluntary lien. When a property owner takes out a mortgage loan, they agree to place a lien on their property. This lien gives the lender the legal right to take possession of the property through foreclosure if the borrower fails to repay the loan.

Home Equity Lines of Credit (HELOC)

A home equity line of credit (HELOC) is another form of voluntary lien. In this case, the property owner borrows against the equity in their home and agrees to place a lien on the property as collateral for the line of credit.

Special Considerations

Recording the Lien

For a voluntary lien to be legally effective, it must be properly recorded with the appropriate governmental entity, often a county recorder or registry of deeds.

Impact on Property Sale

A property with a lien generally cannot be sold until the lien is satisfied (i.e., the debt is paid off). Lienholders must be repaid from the sale proceeds before the property’s title can be cleared for the new owner.

Historical Context

The concept of using property as collateral for loans dates back centuries. Early forms of mortgages were prominent in Roman law and evolved through common law traditions in medieval England. The modern legal framework for voluntary liens and mortgages in the United States was significantly shaped during the 19th and 20th centuries.

Applicability

Voluntary liens apply primarily in real estate transactions but can be relevant in other contexts where property is used as collateral. They are pertinent to anyone involved in real estate, finance, and legal sectors.

Involuntary Lien

An involuntary lien is placed on property without the owner’s consent, typically due to unpaid debts such as taxes or judgments. See INVOLUNTARY LIEN.

Judgement Lien

A judgment lien results from a court ruling against a property owner, used to secure payment of a judgment debt.

FAQs

What happens if I don't pay the debt secured by a voluntary lien?

If the debt is not paid, the lienholder has the right to foreclose on the property, selling it to satisfy the debt.

Can a voluntary lien be removed?

Yes, a voluntary lien can be removed once the debt it secures is fully paid off. A release or satisfaction document must be filed with the appropriate government office to officially remove the lien.

References

U.S. Legal, “Voluntary Lien Law and Legal Definition”
Investopedia, “Mortgage Definition”
NOLO, “Home Equity Loan”

Summary

A voluntary lien is a legal tool that allows property owners to use their property as collateral for a debt with their explicit consent. This type of lien is most commonly seen in the form of a mortgage or a HELOC. Understanding the nature and implications of voluntary liens is crucial for anyone involved in property ownership, finance, or legal professions.