What is the Difference Between a General Lien and a Specific Lien? 

A lien is a legal financial obligation that can be voluntary or involuntary, general or specific. A voluntary lien is a promise to pay off a debt, while an involuntary lien is a court-ordered type of restitution or repayment. The creditor actually has an ownership stake in the property that is liened, allowing them to take possession if the terms of the lien are not satisfied.

Lien records have the potential to severely – or positively – impact one’s credit score and ability to borrow money, qualify for a job in a sensitive financial environment, or advance in the military. Liens that are court-ordered and involuntary, or that are unpaid/overdue are likely to create a financial nightmare. A mortgage lien, which is voluntary, can benefit one’s financial position if it is up-to-date or even paid off early.

Liens come in many forms including:

• mortgages
• mechanics lien
• tax lien
• judgement lien

General vs. Specific Lien

A general lien is one that allows the creditor to take almost any possession the court allows if the terms of payment are not met. That means a debtor who does not pay a general lien may have a vehicle repossessed, their house sold for repayment, or bank accounts seized.

Types of General Liens Include:

• tax liens – these liens are levied for unpaid taxes, through the IRS. Tax liens are created through laws rather than contracts (like a mortgage) and allow the IRS to seize and sell the property to satisfy the debt. As of 2018 tax liens are not reported on financial histories and therefore do not impact an individual’s credit score (this was due to a high number of errors in the reporting).
• Judgement liens – are those assigned by a court. A judgement lien is a court’s permission for a creditor to take an ownership stake in a piece of property in order to satisfy a debt. The property is usually sold or auctioned to repay the debt.

A specific lien is more common. These liens are a sort of collateral against a major loan like a mortgage. If a homeowner defaults on a mortgage the bank has the right to sell the house in order to pay off the loan. It’s similar for auto loans, which allow the creditor to repossess a vehicle if the loan is not paid up.

Types of Specific Liens Include:

• mortgage –  is a specific lien that allows the bank holding the note to sell or otherwise possess the property if the mortgage is unpaid for a certain period of time.
• mechanic’s lien -- allows a person who works on (fixes, renovates, etc.) a piece of property to retain an ownership stake until the debt for the work is paid.
• UCC lien – allows movers to withhold property until they are paid, a lien that is provided by statute (law), somewhat similar to the ability of the IRS to levy tax liens when necessary.

Liens often show up on property deeds and may prevent the real estate from being sold until the lien is cleared. Similarly one cannot sell a vehicle without the title, so the bank that holds the vehicle loan holds the title to the vehicle until the debt is paid. Sometimes there are concurrent liens on the same piece of property; a court may need to decide which takes precedent or is considered the “first lien.”

Common Lien Situations

Liens are a part of everyday life, even if one is not aware of the proliferation of such encumbrances. Other than mortgages and auto loan liens, the following are liens that are processed daily:

• hospital liens – a general statutory lien that allows a hospital to collect unpaid bills;
• landlord’s lien – allows a property owner to take and sell a tenant’s possessions in exchange for unpaid rent;
• manufacturer’s lien – allows a manufacturer to take a possessory interest in a product until their expenses are paid;
• environmental lien – allows an interest to be held in a property in order to pay for clean up of environmental toxins or waste.

HOA Liens May Lead to Foreclosure

There are some 370 Homeowners Associations (HOA) in the United States that represent 40 million households. These organizations are legal entities that control aspects of life in many communities, including making rules about the appearance of properties, how many vehicles may be present, and improvements to be made to the buildings and community spaces. Property owners within HOA communities are obligated to make payments to the organization as well as to abide by the rules. If betterments are levied in order to repair roofs, sidewalks, or to upgrade the water system then all owners are expected to pay their fair share. When an owner does not pay their monthly fees (which average $250 in the U.S.) or is fined by the association, a lien may be attached to the property for the unpaid fees and attorney’s fees, late fees, and other costs added to it. Over time, the HOA organization may need to go to court to execute the lien, forcing a sale of the property in order to collect the amount it is owed.