A lien enables the lienholder to claim possession of property owned by another. A mechanics lien is a common example of a lien. When a property owner hires a person to perform work, such as remodeling a house, the worker can place a lien on the property. If the owner does not pay for the work, the worker can take steps to enforce the lien. If the terms of the lien are satisfied, the lienholder should prepare a lien release letter.
Lien release letters should have a conspicuous title such as “Release of Lien” at the top of the page. The first paragraph should list the date the lien was placed on the property and the names and addresses of both the lienholder and the owner of the property. The drafter should include information about where the lien was recorded, such as listing the address of the property records office and including the volume and page number of the recorded lien. No specific wording is required; a few quick sentences containing the above mentioned information generally suffice.
The second paragraph of the letter should contain a legal description of the property. A lead in might be “The property subject to the lien is described as follows:” The legal description of the property is required so that there is no doubt as to what the lien covered and as to what is being released. The property records office where the original lien was recorded can provide the drafter with the legal description of the property.
A lien release letter is akin to an acknowledgement of an agreement to relinquish the lien. Legal agreements need “consideration” to be binding. Consideration means that something of value is being exchanged between the parties. In a lien release, the lienholder is giving up his right to enforce the lien, and the owner is giving money to the lienholder for the release. A typical sentence could be “In consideration of [dollar amount], [lienholder] releases the lien associated with the property described above.”
The lien release letter should be signed and notarized. Drafters must beware that state laws may specify the exact nature of a lien release letter. A drafter should take his lien release letter to a legal professional for review prior to presenting the letter to the owner.
This article was written for informational purposes only; it does not provide legal advice.