Liens: What You Need to Know
A lien is a security interest taken out against a property, most commonly by a lender, but sometimes by other groups. If you have a lien on your property, it typically gives the lien holder the ability to sell it and use the proceeds to pay off the amount of the delinquent loan. Having a lien on a property can seriously affect the marketability of the property's title-- which means it could make it difficult to sell in the future.
Common Types of Liens
Some of the most common types of liens include:
Bank liens: These are taken out by a bank due to a loan, most often a residential or commercial mortgage or equity loan, a HELOC, or a commercial equity line of credit. This is often the most common type of lien, and is also often the easiest to discover.
UCC liens: Liens taken out by banks, contractors, or creditors on business property, which can include real estate. Some UCC liens are taken out on specific property, like a vehicle, while blanket liens are taken out on an entire business (and may be more likely to attach themselves to property.)
Mechanic's liens: These are taken out by contractors or subcontractors who have done work on a property but have not been paid. Even if a contractor has been fully paid, if they contractor has not paid their subcontractors, they can still take out a mechanic's lien on the property.
Association liens: These are taken out by a homeowner's association (HOA) to pay for unpaid fees or dues. Often, there can be more than one association that is responsible for a home or neighborhood-- and some associations may not even be aware of the others' existence.
Getting a Title Search Can Help Discover Unknown Liens
Making sure to get a title search before closing on a property is one of the best ways to ensure that there are no unknown liens, easements, conveyances, or other title issues that could impact the current and future value of the property. And, of course, it's essential to purchase title insurance (and, in some cases, title insurance endorsements), in order to protect yourself from unknown liens popping up after you close on your new property.