What is a property lien and how do they affect title?

A property lien is a legal claim against a property that secures the payment of a debt or obligation.

It essentially gives the lienholder a security interest in the property until the debt is satisfied.

How Liens Work

When a lien is placed on a property, it:

• Creates a public record attached to the property’s title
• Gives the lienholder certain rights to the property
• Remains with the property regardless of ownership changes
• Must typically be paid before the property can be sold with clear title

Common Types of Property Liens

• Mortgage liens: Created when you take out a loan to purchase property
• Tax liens: Placed by government entities for unpaid property taxes
• Judgment liens: Resulting from court judgments against the property owner
• Mechanic’s liens: Filed by contractors for unpaid work on the property
• HOA liens: For unpaid homeowners association fees

How Liens Affect Title

Liens create what’s called a “cloud on title” or an encumbrance that:

• Prevents the owner from conveying clear title to buyers
• May make it difficult or impossible to refinance
• Can affect the property’s marketability and value
• May lead to foreclosure if the underlying debt remains unpaid

Most buyers and lenders require “clear title” (free of liens) before completing a real estate transaction, which is why title companies perform searches to identify existing liens before closing.

If you’re dealing with specific lien issues, I’d recommend consulting with a real estate attorney as lien laws vary by state.

Property Liens: What You Need to Know Before Buying Real Estate

What Is a Property Lien?

A property lien is a legal claim against a property that serves as collateral to secure payment of a debt or fulfillment of an obligation. When a property has a lien, it creates an encumbrance (or “cloud”) on the title, potentially affecting ownership rights and property transfers.

Types of Property Liens

Property liens fall into two main categories:

Voluntary Liens

• Mortgage liens: Created when you borrow money to purchase property
• Home equity lines of credit: Secured by your property’s value

Involuntary Liens

• Tax liens: Placed by government agencies for unpaid taxes
• Judgment liens: Resulting from court decisions
• Mechanic’s liens: Filed by contractors for unpaid work
• HOA liens: Placed by homeowners associations for unpaid dues

How Property Liens Work

Liens are “perfected” through recordation with the appropriate government office, typically the county recorder. Once recorded, a lien becomes public notice of the creditor’s interest in the property.

Important facts about property liens:

• Liens can be enforced through foreclosure proceedings
• When lien amounts are paid in full, the lien is “released”
• In most states, judgments must be processed in or transferred to a superior court before being recorded

Special Types of Property Liens

General Liens

General liens follow an individual rather than just a specific property. Federal tax liens filed by the Internal Revenue Service are common examples of general liens.

Municipal Liens

Municipal liens are placed by local government authorities against property owners who benefit from public improvement plans.

Important note: Federal and state tax liens may remain attached to property even after foreclosure, though principal balances can sometimes be negotiated.

Property Liens and Real Estate Transactions

One of the riskiest moves in real estate is making an offer without checking for liens or encumbrances. This risk increases with:

• Seller financing arrangements
• Owner-carry contracts
• Properties in states where liens are not easily accessible public records

Protecting Yourself from Property Liens

The most reliable protection against unknown property liens is title insurance from a reputable title company. This insurance:

• Verifies clear title
• Reduces future liabilities
• Protects your investment

Always conduct thorough due diligence before purchasing real estate to ensure you’re not inheriting someone else’s debt obligations through property liens.