What is a partial release of lien?
Mortgage law can be confusing, so it’s no surprise if you find yourself asking, “What is a partial release of lien?”
A partial release of lien is a legal document that releases a specific portion of a property from a previously filed lien.
It allows the property owner to clear the title for a portion of the property by satisfying the lien for that particular section, while the lien remains on the remaining portion.
If you own real estate, you may have to consider a partial lien release at some point.
Say you’re borrowing via a mortgage — you might need one to sell or partition parts of your land.
In this article, we’ll discuss what a partial release lien is and why you might want to agree one with your creditor.
We’ll also look at how PandaDoc can help you effectively handle real estate transactions.
Release of lien definition
If you’ve ever bought real estate, you’ll probably have come across the term “lien”.
A lien is essentially the right to hold collateral until a debt is paid — in real estate, this typically takes the form of a mortgage.
“Release of lien” refers to the moment when a borrower has paid their mortgage in full, thus allowing the creditor to relinquish all claims on the property.
But what happens if you want or need to release only some of the creditor’s collateral?
In this case, you don’t need to worry about paying off your mortgage in full. Instead, you may be able to use a partial lien release to remove the lender’s claim from a particular section of the property.
What is a partial lien release?
This is when a lender releases their lien on part of your property.
This is in place of a full release, which usually only happens once you’ve paid off your mortgage completely.
A partial release enables lenders to waive their claim on a certain amount of collateral in a mortgage agreement.
It is usually enacted through a specific provision in your real estate purchase agreement or mortgage contract.
As your creditor loses some of the collateral that comes with a mortgage when they agree to one, they need to be sure you’ll be able to keep up with payments.
This means most lenders will only consider an application for a partial lien release once you’ve completed at least 12 months of payments.
So, why might you want a partial lien release? Perhaps the most common reason is that a borrower wants to sell part of their mortgaged property.
When this is the case, the buying party requires a clear title to their purchased land, which is impossible if your creditor still holds a claim on it.
A partial lien release allows you to make the sale without first fulfilling all your mortgage payments.
There are various other reasons why a partial lien release might be necessary.
You might need to grant a utility company access to part of your land, or you may want to partition your real estate.
The critical thing to remember is that any land transaction that involves only a small part of your property may be accomplished using a partial release.
However, like most legal transactions involving real estate documents, this can be complicated. If you’re considering going down this path, you should be aware of the following points:
- You might have to pay various fees to get your partial lien release approved and processed.
- Not all mortgage contracts include provisions for a partial lien release.
- Borrowers might have to pay off a large amount of their mortgage before the creditor will consider a partial release.
What is a partial lien waiver — and is it the same as a partial lien release?
A partial waiver of lien is a document that shows part of the outstanding debt on your mortgage has been paid. It’s not the same as a partial lien release.
However, the two are linked.
This is because a partial waiver is usually needed before a partial lien release can be approved by the creditor.
What about a partial conditional lien waiver?
There’s also another type of legal document to consider.
A partial conditional lien waiver is like a partial lien waiver — but it explicitly states the lien will only be released once a particular condition has been met (usually a set payment amount).
Understanding liens can help you protect your real estate interests
There’s no doubt that getting your head around liens is a pivotal part of managing real estate — or that organizing partial releases may be unavoidable if you want to sell parts of your real estate portfolio.
If you lack legal expertise, sourcing the correct documents for this process can be daunting.
PandaDoc can help by providing accurate and effective templates for a range of land transaction documents.
Whether you need to produce a release of liability agreement, a partial lien waiver, or a partial release of lien, PandaDoc is the best place for streamlined and straightforward document creation.