Creditor Claims on Your Home: Understanding Property Liens

Answer

A lien on a property is a legal claim that a creditor places against real estate to secure repayment of a debt or obligation. When a lien attaches, it encumbers the title—meaning you can’t sell or refinance until you satisfy or remove the lien.

Liens arise in various situations, including:

• Mortgage liens: The lender holds a lien until you fully repay your home loan.
• Tax liens: Local or federal authorities file a lien for unpaid property taxes or income taxes.
• Mechanic’s liens: Contractors or suppliers record a lien when they haven’t been paid for work performed or materials provided.
• Judgment liens: Court rulings against you for unpaid debts can lead to a lien on your real estate.

Key points about property liens:

• Public record: Liens appear in county land records, alerting buyers, title companies and lenders.
• Priority: Liens rank by filing date and type. Senior liens (like tax liens) must clear before junior liens (such as second mortgages).
• Impact on closing: Title searches reveal liens. Sellers must pay them off or negotiate pay-off from proceeds to deliver clear title.
• Removal: Satisfy the underlying debt, obtain a release from the creditor, and record a lien release or discharge in the county recorder’s office.

Because lien rules vary by state and county—affecting notice requirements, priority and removal procedures—it’s advisable to:

• Review your title commitment or preliminary title report carefully;
• Consult a licensed real estate attorney or title company to verify lien status;
• Buyers are recommended to purchase title insurance to protect against undisclosed liens.

Lien management protects both sellers and buyers. Promptly addressing any recorded claims ensures smooth closings and guards your equity. Before finalizing any transaction, it’s advisable to check with a licensed professional to confirm that all liens are properly identified and cleared.