small business owner signing legal documents

What Kind of Liens Can Be Put on a Small Business? 

A lien is a legal claim against the property or assets of a business. When a lien is placed on a piece of property, it gives a creditor a security interest in that property until the lien is released. Although the lien laws affecting small businesses vary by state, a creditor can usually file a lien if a business fails to pay one or more debts. In this article, we discuss the kind of liens that can be put on a small business. 

Judgment Liens 

A judgment lien is a type of lien that the court can attach to a business debtor’s property as the result of a court judgment. A judgment lien may only attach to real property in California. To attach a judgment lien to a small business’s real property, the creditor must record an abstract of judgment at the office of the county recorder. A court may grant a creditor a judgment lien against the real property of a small business as security for money owed. In other words, when a judgment lien is placed on a business’s real property, it secures payment of the debt owed if the owner of the business liquidates assets or sells the property. In addition, a business can be hampered with a judgment lien as a result of a lawsuit. 

Tax Liens

A tax lien may be placed on a small business as security for a federal, state, or local tax debt. Business property subject to a tax lien includes vehicles, real estate, and accounts receivables. After a taxing authority sends a notice of demand for payment to a small business, the authority can file a tax lien notice if the business fails to pay the debt within a certain period. 

Security Interests

A security interest lien is a contractual lien in which a business voluntarily consents to the attachment of its property in exchange for a loan. For example, if a creditor loans money to a business to purchase a piece of real property, the business in exchange may give the creditor a security interest in same piece of property. If the small business defaults on its payment obligations, the creditor can then take possession of the property.

Mechanic’s Liens

Finally, a supplier, contractor, or subcontractor can place a mechanic’s lien on the property of a small business if the business fails to pay a debt. For example, if a contractor constructs a new building on a small business’s property, the contractor may file a mechanic’s lien against the property. By doing so, the contractor can prevent the refinance or sale of the business property. In addition, in some cases, a mechanic’s lien can permit a creditor to sell the property at auction to pay the debt.

Act Now to Remove or Settle Your Judgment Lien 

If you are dealing with a judgment lien issue, you should contact a judgment lien removal attorney for assistance. At the Fullman Firm, our experienced judgment lien removal attorneys have removed hundreds of judgment liens, many of which were removed without making payments to debt collectors. Please contact us today to schedule a free initial consultation with an experienced judgment lien removal lawyer.