Glossary

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Contractual Lien
This is the legal name given to the ownership interest that a party has in a property on the basis of some contract. The most common type of contractual lien is the mortgage or deed in trust. The important thing to remember about a contractual lien is that the property interest is given to another party voluntarily. The borrower signs a contract with knowledge that he or she is giving the mortgage lender an ownership interest in the property. If the borrower then fails to meet the requirements of the contract, the lender can use the lien to foreclose on the property. A contractual lien can be contrasted to other types of liens, including the mechanic's lien. With involuntary liens, another party has an ownership interest without the property owner's direct consent. For instance, if a property owner fails to pay the contractors who did work to improve the property, they might file a mechanic's lien without the owner's consent.