Liens on Property

A lien is a legal claim recorded against a property to secure some kind of debt obligation. If you own real estate and you owe someone money, they can file a lien with the county clerk at the county recorder’s office where your property is located. The lienholder is basically creating a public record that you, as the property owner, have some unpaid debt owed to a creditor.

If you’re a homeowner with one or more liens on your home, you should speak to a real estate lawyer to help you figure out if they are valid.

Types of Liens for Real Property

Many different kinds of liens can be placed on real property. A voluntary lien is one you agree to, such as when you voluntarily borrow money to buy or refinance your home. An involuntary lien may be recorded against your property by law and against your willful consent, such as when you lose a court case or fail to pay your taxes.

Some common real property liens include:

• Mortgage liens – A mortgage lender secures its home loan using a mortgage lien recorded against a borrower’s home.
• HOA liens – A homeowners association (HOA) has the right to place a lien on a property for which the owner has failed to pay HOA dues, assessments, or penalties.
• Tax liens – to cover unpaid state or federal IRS income taxes (federal tax liens)
• Property tax liens – filed by a local county assessor to cover unpaid property taxes
• Judgment liens – If you were a losing defendant in a legal action, the prevailing plaintiff may take their court judgment and record it against property that you own.
• Mechanic’s liens – Also known as a construction lien, contractors and subcontractors can file mechanic’s liens for unpaid construction work.

House Liens vs. Personal Property Liens

There are different types of property liens. The ones discussed above attach to real property.

Other kinds of liens can attach to personal property or they may be unsecured (unattached) until you are sued in court and a recordable judgment lien is obtained. Examples of personal property liens include:

• UCC liens – A Uniform Commercial Code filing (UCC statement) can be placed on personal assets of a person or business.
• Car liens – If you financed or leased your vehicle, the lien will protect the car dealership and/or financer until the car is paid off or repossessed.
• Credit card debt, medical debt, and other unsecured debt – You might be personally liable for all kinds of debt. For example, if you get sued for unpaid student loans and lose, the lender may record a court judgment against any real property you own.

Even when your real property is unaffected by an unsecured debt or other kind of lien, your personal credit report might still contain an adverse record about the debt. This can affect your credit score negatively, not to mention it might discourage lenders from letting you borrow money from them in the future. Therefore, even unsecured liens that don’t affect your real property can still tarnish your personal finances.

Who Can Put a Lien on a House?

Anyone with a valid court judgment or with a valid claim to your real property may have a legal right to record a lien against it. Some examples include:

• Construction or home improvement contractors
• Your lender (bank, private financer, mortgage company)
• Your local or state taxing agency, or the IRS
• Your local child support department
• Someone who sued you in court and won

If someone places a lien on your home without your permission, you may be able to sue them for slander of title. This kind of claim can vary depending on your state, but in general, the idea is to force a lienholder (or someone slandering the tile) to provide a lien release if they are not your rightful creditor or if you have no legal debt obligation to them.

Certain kinds of liens can lead to the foreclosure of your property, which might eat into any home equity that you built over the years. For example, if you missed multiple mortgage payments, a bank might foreclose on your home to obtain loan repayment plus interest.

Can You Sell a House With a Lien?

Yes, but any title company that facilitates a home sale will run a title search on your house. You may not be able to complete the transfer to the buyer of your house until you clear title.

A lender will usually require a mortgage to be paid off before they will issue a lien release. Other types of liens, such as tax liens or HOA liens, might eat into the proceeds of any payment you receive from selling your home.

If the total dollar amount of all the liens on your property exceeds your home equity, you might not get any money from selling your house. However, some states, like California, have homestead protection laws that disallow creditors from touching the first few hundred thousand dollars of equity in your primary residence.

Sometimes lienholders may work with you to allow the buyer of your home to willingly take over the payment plan on existing liens (encumbrances) on your home. This is common in cases where property is transferred between family members, such as through gifts and inheritances.

How Can You Get a Lien Off Your House?

You can clear a lien by:

• Paying off the debt that caused the lien to be recorded in the first place
• Speaking with your lender or creditor to negotiate a different collateral or loan modification
• Suing a lienholder that may have illegally placed a lien on your property
• Selling your property and using the proceeds of your home equity to pay off the liens

There might be other ways to get rid of a lien, such as by having someone else take over obligations for a debt. However, a lender will usually want to have some kind of collateral for that debt, so if the lien is being taken off your house, chances are the lender will want the other person (your transferee) to provide a property of equal value to secure the debt.

Should You Buy a House with a Lien?

A homebuyer’s real estate agent might find the perfect house for them, but they might be let down when they find out the property is marred by all kinds of recorded liens.

Some liens will go away when you buy the house. For example, if your seller has a mortgage lien and you pay them for the full value of the house, your seller’s creditor (the bank that lent them the mortgage) will receive a payoff by the time escrow is closed. This is not a problem as long as the value of the home is higher than the size of the liens that are recorded against it.

However, sometimes, a property might be secured by liens that exceed its value. For example, if the seller of a home has an underwater mortgage, this means their property has lost so much value that its value is smaller than the loan they took out to buy it. Other times, a property might be so heavily weighed down, or encumbered, by property tax liens that it is not worth its advertised purchase price.

Most of the time, if the encumbrances on a property exceed or come close to the entire value of that property, then the property will be significantly priced down to attract buyers. For example, a $200,000 house that is encumbered by $150,000 in secured and unpaid property taxes might cost (or be advertised on the market as being) closer to $50,000 to account for all the liability that will run with the land when the new owner purchases the property from the original seller.

Contact a Real Estate Attorney

If you’re worried about your property title or have questions about liens on your house, a lawyer can give you legal advice. An experienced real estate attorney will have most of the answers to frequently asked questions about liens and debt, but they will also be able to help you with more specific situations that might not be covered here.

For example:

• A Texas real estate lawyer can correspond with the Texas Department of Housing and Community Affairs for obtaining information on specific types of tax liens.
• A Florida real estate lawyer can help you with judgment liens filed with the Florida Department of State.

There are many other situations where having a real estate legal advisor on your side can make a huge difference. Consulting with an attorney can ensure that your legal rights are protected.