A lien will be placed against a vehicle title to give a creditor security interest in the car until the balance owed is paid in full. The most common title liens are placed by institutions that provide financing for vehicle purchases. A lien can also be placed against a title by a repair shop or an impound yard for nonpayment on services rendered or for daily storage fees. These liens are referred to, respectively, as mechanic’s and storage liens. They must also be paid in full to be released, but the process is different than that involved in removing a lender’s lien.
A lien will be placed on the vehicle title by a lender to prevent the transfer of ownership to another party before the loan is paid off. Depending on the state where the car is registered, title can either be held by the vehicle owner or by the lien holder until the loan is satisfied. If the title is held by the vehicle owner, it will show the lender’s name as a lien holder. Liens against vehicle titles are also recorded with the Department of Motor Vehicles in the state where the vehicle is registered.
The process of releasing the lender as a lien holder can begin when the principal, interest and all fees associated with the loan have been paid in full. With the loan satisfied, the lender will send proof of payment to the vehicle owner, which can be a completed “Notice of Recorded Lien” form or a letter written on the institution’s letterhead stating that the loan has been paid. The title listing the lien holder will be sent with these documents if the lender held the title. All paperwork should be presented to the DMV, which will provide a new certificate of title showing only the vehicle owner’s name.
A mechanic’s lien can be placed on a vehicle if payment for repairs, parts or services is not paid for a period defined by each state. In Tennessee, for example, the repair shop must wait at least 30 days before requesting a lien. Storage liens, which are commonly placed by towing or impound yards, are generally executed for nonpayment in the same manner. Both liens allow the vehicle to be sold at auction if payment isn’t received by the state’s mandated deadline.
While the process of releasing a lender’s lien is similar across the country, the protocols for removing mechanic’s and storage liens are set by each state. Some states, including California, require that a lien holder on a mechanic’s or storage lien that has been paid in full by the vehicle owner fill out specific forms to release the lien. The release form can be presented to the DMV to release the lien holder from the title. The process of releasing these types of liens can also be executed using escrow accounts administered by county offices that coordinate the payment of the debt as well as the filing of release papers with the state DMV to remove the name of the lien holder from the vehicle title.
