Liens are a common type of title defect that can interfere with the transfer of ownership rights surrounding a real estate property. Essentially, a lien is a security instrument representing a creditor’s (or legal entity’s) interest in a property as collateral for a debt. If the lienee fails to uphold their end of the obligation, the creditor has a legal claim to the property in some capacity. In a number of cases, unresolved liens impede the process of transferring the deed of a property to a new party, creating a title defect or barrier to closing.
Common Types of Liens
Liens may be held by financial institutions and additional creditors, government municipalities, tax authorities, and other parties. Some of the most common types of liens include:
-Bank (mortgage) liens
-Child or spousal support liens
-HOA (homeowner association) liens
Will a title search identify unresolved liens?
During the settlement process, a title agent or an attorney will conduct a thorough title search in an effort to identify conditions that may prevent ownership transfer or jeopardize a homeowner’s property rights. Since liens are recorded in public records, a title search should generally uncover any outstanding liens associated with the property.
How are liens resolved?
Liens may be resolved in a number of ways, which are largely based on the nature of the lien. In many cases, liens must be paid off or satisfied according to the lien holder’s discretion before being released. Sellers may also attempt to negotiate the dollar amount of a lien into the contract price of the property. Liens recorded erroneously may be disputed through legal proceedings. The manner in which liens are resolved may also vary by state or municipality.