What Are Liens?

By RealtyCrunch IncApril, 20th 2020
What Are Liens?

Real Estate liens are financial claims against your property

There are two types of liens:

Voluntary Lien is where the property owner willingly takes some action that enables the placement of a lien against the property. Most common example would be a mortgage. The lien allows the lender to foreclose if the borrower doesn’t pay the mortgage. The lien thereby gives the lender collateral for the debt.

Involuntary Lien is placed on the property against the will of the owner. If the property owner owes money to someone and the owner doesn't pay, a lien is placed on the property.

Examples of involuntary liens:

  • Tax lien: if you don't pay your property taxes for a set number of time
  • Unpaid income taxes: the IRS can place a federal tax lien on your property
  • Mechanic’s lien: if there is nonpayment for work done on the property
  • Judgment lien: usually are created as a result of a court action.
  • Unpaid utilities
  • HOA dues
  • Child support payments

In general, when buying a property your title company will do a lien search and make sure there are no involuntary liens on the property. Liens often times come to haunt you later, this is an important element to pay attention to!