A lien affidavit can refer either to the form used to file a lien against a piece of property or, in some cases, an affidavit sworn by a property owner that the property is free of liens and claims. Creditors often use lien affidavits to protect themselves and secure a debt, while a document that is sometimes called a no-lien affidavit may be required to complete a type of property sale. As liens can considerably damage the value of a property to a prospective buyer and can place significant burdens on a property owner, the use of written documentation is essential in both securing and documenting liens.
Creditors often secure liens in various types of property in order to secure a debt. If their debtor defaults on what is owed, the creditor can claim her share of the property. Depending on the laws in a given jurisdiction, the lien holder may be able to force a property owner to sell the property and then recoup the debt from the proceeds. In other cases, the creditor may not be able to require the owner to sell immediately, but would be able to collect the debt once the property is sold.
A creditor can obtain a lien in one of several ways. For example, if a debtor defaults on an unsecured debt, such as a credit card, the credit card company or a debt buyer can sue the debtor in court. Once the creditor wins a judgment, the creditor can take a lien out on the property of the debtor. In cases where the debt is for construction or remodeling done to a home, the process can be even simpler, though again, different areas may have different laws. The contracting company along with its sub-contractors and suppliers can claim payment by filing a lien affidavit at a local courthouse. Once this happens, it can be up to the homeowner to dispute the legitimacy of the lien. Such liens are often known as a construction lien or mechanics lien.
When people sell their home or other valuable property, their buyer may require that the owners sign a no-lien affidavit. This document states that the homeowner is not aware of any liens on the property. This provides buyers with protection against buying property that is worth less than it appears because a creditor holds an interest in it. It can also prevent the buyer from being held responsible for paying off liens acquired on a property before the buyer became its new owner.