Mortgages represent the most common form of lien against residential or commercial properties. Failure to pay the amounts due on these lending arrangements can result in foreclosure of real estate holdings by lienholders. Non-mortgage liens, however, may present special difficulties for creditors seeking the money they are owed for services rendered. Working with a Houston area firm that specializes in Katy real estate law can provide the added help needed to ensure that clients and companies live up to their financial obligations in the credit marketplace. Here are some of the most important factors to consider when pursuing non-mortgage liens in the legal arena.
Two Options for Non-Mortgage Liens
Non-mortgage lienholders typically have only two options when attempting to recover payments from property owners:
- They can wait until the residential or commercial property is sold or refinanced. At that time, the owner will generally be obligated to pay off their liens to allow for financing and to remove financial encumbrances that can scare off buyers in the real estate market.
- Lienholders may also foreclose on the property through a court action. This legal process may be complicated in some states, however, by homestead exemptions and other barriers to foreclosure by lienholders.
Retaining the services of a Katy corporate law firm can often provide the in-depth analysis and information needed to make the right decision regarding these available options.
Understanding the Homestead Exemption
Most states make provision for a homestead exemption that allows debtors to retain some or all of the equity in their home during a bankruptcy. The same legal mechanism that protects the primary residence of the debtor against seizure in a bankruptcy can also be used to block non-mortgage lienholders from foreclosing on these properties. Texas law, for example, allows homeowners to exempt the entire value of their primary residence in cases of non-mortgage foreclosure. Additionally, homeowners in urban areas can exempt up to 10 acres of land; in rural areas, this is expanded to 100 acres for unimproved land and 200 acres for land on which a residence is located. For this reason, it is generally recommended that non-mortgage lienholders consult with a legal firm before attempting to foreclose on properties in the state of Texas.
Some Exceptions to the Homestead Exemption
Texas law does allow for some non-mortgage lienholders to pursue foreclosure proceedings despite the homestead exemption. These exceptions include but are not limited to the following:
- Property tax liens can lead to foreclosure at any time after the tax debt becomes delinquent.
- Mechanics’ liens are associated with home improvements and repairs and can be pursued if all contractual materials were filed and executed properly.
- Manufactured homes may be financed outside of the mortgage process and may be subject to foreclosure by the manufacturer or sales agent.
- Default on home equity loans can lead to foreclosure proceedings under certain limited circumstances.
- Purchase money liens are generally collectable through foreclosure in the state of Texas.
- Owelty liens are used in divorce cases to divide the interest each partner has in the home. The spouse retaining ownership rights of the property must typically pay the other party for giving up their share of the marital home.
In many cases, a qualified Katy business law professional can provide the information and legal support necessary to determine if a particular case falls into one of these categories and can be pursued through foreclosure on the property.
The legal experts at Lambert & Jakob specialize in all aspects of business and real estate law. We offer a full lineup of services designed to help modern companies maintain their profitability in the competitive marketplace. If you are considering legal action against a home or commercial property owner for failure to pay for services rendered, call us at 713-640-5700 to schedule a free initial consultation. We look forward to helping you protect your legal rights.