Liens (Overview)

AUTHORITY:
Tenn. Code Ann. Sections 55-3-114, 55-3-122, 55-3-123, 55-3-124, 55-3-125, 55-3-126, 55-3-127, 55-6-101(a)(2), Public Chapter 462

DESCRIPTION:

  • A lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienor and the person who has the benefit of the lien is referred to as the lienee.
  • A lienor, or lienholder, is any person or entity that holds a lien, mortgage, conditional sales contract or any encumbrance against a motor vehicle. There may be multiple debts against the same vehicle by different debtors. Therefore, recording dates become extremely important in determining priority.
  • Errors in omitting a lien can cost the state thousands of dollars as lienholders may file a claim against the state to recover a financial loss due to an error made by the state or individuals operating as agents of the state.

REQUIREMENTS:

  • Determine if the current title has a lien that needs to be discharged or if the new title should have a lien. The most common areas where a lien would appear are:
    • Front and/or back of title
    • Back of the title
    • Bill of Sale
    • Signature Page on the Multi-purpose, Noting of Lien and Duplicate Title application
    • Foreign and Out of State Registrations
  • All liens must be discharged prior to transferring ownership except in cases of repossessions

NOTES:

  • Liens are recorded several ways:
    • In most instances, licensed dealers submit the paperwork to the county clerk for recording            the original lien on a vehicle.
    • Liens on motor vehicles may also be recorded through the County Clerk’s office as a Noting of Lien Transaction after an owner’s name appears on the certificate of title by the lienor submitting an Application for Noting of Lien. Most frequently, these would be subsequent liens, but they could also be a first lien or a lien after previous liens are discharged. The Lien information is also included on the application by the County Clerk. Applications must be supported with a valid Tennessee Certificate of Title and a copy of the lien instrument (security agreement). The noting of lien does not change the ownership.

EXAMPLES:

Example: DO NOT note lienholder if the same
   

     Owner: Toyota Motor Credit
                 PO Box 123
                 Clarksville, TN 37042
   

     Lienholder: Toyota Motor Credit
                      PO Box 123
                      Clarksville, TN 37042

Example: DO NOT note lienholder if same name but different address

     Owner: Toyota Motor Credit
                 PO Box 123
                 Clarksville, TN 37042

     Lienholder: Toyota Motor Credit
                      PO Box 567
                      Nashville, TN 37586

Example: CAN note lienholder if different name but same address

     Owner: Toyota Motor Credit
                 1234 Any St
                 Clarksville, TN 37042

     Lienholder: Toyota Financial Services
                      1234 Any St
                      Clarksville, TN 37042

Example: Can note a lienholder if different names all together

     Owner: Toyota Motor Credit
                 PO Box 123
                Clarksville, TN 37042

     Lienholder: Fort Campbell FCU
                      2088 Lowes Dr
                      Clarksville, TN 37043

  • First lienholders may file a certified copy of the lien instrument along with the applicable fee with the Secretary of State to create constructive notice of such lien in the absence of an MSO or certificate of title. Constructive notice would occur as of the date of creation of the lien if filed within twenty (20) days. Otherwise, constructive notice would be as of the date of filing.
  • Dealer Floor Plans should be filed on a Uniform Commercial Code (UCC) instrument with the office of the Secretary of State. A lien filed in this manner would terminate after 180 days or after being perfected in the usual manner.
  • Liens on mobile homes that become real property are recorded with the County Register of Deeds.
  • Recording of liens on farm equipment and special mobile equipment are filed with the County Register of Deeds or the Secretary of State.
  • The lienor's interest is perfected by delivery to the county clerk or Division when submitted with required fees, proof of the lien and proper documentation. The security debt is perfected as of the date of delivery to the county clerk or the department.
  • When the debt is satisfied, the lienor must discharge the lien, mortgage or encumbrance by indicating the discharge date on the tear away portion at the top of the 8½” x 11” certificate of title, a copy of the title, or a completed discharge of lien form.
  • The certificate of title is forwarded to the owner in the event no subsequent lien is recorded. The lienor must report the discharge of lien to the Division within 72 hours of the discharge. The lienor is required to deliver the certificate of title to an owner within seven (7) business days of the owner’s request after the lien has been discharged.

EXAMPLES:

Lien Placements on a Tennessee Title

 

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