What's a Lien?

Don’t let your real estate transaction be held up by a lien

A lien is not the obstacle you want to discover during the purchase or sale of property. While most properties are unencumbered, ownership cannot be transferred from one party to another if there is a lien on the land or property. To prevent such a burden from taking place, it’s important to understand what a lien is, the different types of common liens, and what you can do to navigate through the lien settlement process.

What is a lien?

A lien is a notice attached to your property stating that another creditor has a claim over your land or home because of an outstanding debt. It’s a public record filed with the county or state—depending on the type of property you own. While there are a number of different types of liens creditors can put in place, the most prominent include tax liens, mechanics’ liens, and judgement liens.

3 Common Property Liens

1. Tax Lien.

   `The federal government will place a tax lien on a taxpayer’s property when the taxpayer fails to pay or shows signs of being incapable of paying the IRS. This type of lien takes precedence above all other creditor liens. Once a tax lien is in place, it can prevent them from receiving credit in the future and make it nearly impossible to sell their home. If the taxpayer fails to pay the full amount owed or reach a settlement with the IRS, the government can seize any assets owned by the taxpayer.

2. Mechanics’ Lien.

   A mechanics’ lien is filed by a general contractor, plumber, electrician, or other workers when they provide services or materials for a property and the property owner fails to pay for those services. A mechanics’ lien secures the debt owed to the service provider and ensures they will be compensated for their services. These liens are governed by state law, and the process to file or resolve them may vary.

   
   

3. Judgment Lien.

   Loss of a court case with a judgement against you can result in a judgement lien. This may include child support, alimony, or other court-ordered payments. The lien will remain attached to your property until the debt is paid in full. Additionally, attorneys can place judgment liens for unpaid legal services.

   
   

How a Lien Can Impact a Real Estate Closing

When looking to sell or refinance your home, you must prove that your home has a clear title. Having a lien on your property makes your title unclear, rendering it impossible to close on a sale. To clear the title, creditors must be paid the amount of debt attached to the property or have the debt settled in a court of law.

If you’re a buyer, discovering a lien on your potential future property can delay the closing process and add unexpected complications. However, understanding liens and addressing them proactively with the help of real estate professionals can make the process smoother.

Pro Tips for Managing Liens

• Check for Liens Early: Use online property databases or government portals to check for liens before entering negotiations. This can save time and money during the closing process.

• Consider Title Insurance: Title insurance can protect buyers from liens that may not surface until after closing.

  
  

• Work with Experts: Real estate attorneys and title companies are invaluable in identifying and resolving lien issues.

Next Steps

In the event that a lien is placed on a home you own or are trying to purchase, our real estate attorneys can help you uncover details about any liens and take the steps to remove those encumbrances. Whether you’re a buyer or a seller, understanding liens, their implications, and how to navigate them is essential for a successful real estate transaction.

Contact us today to have one of our experienced real estate attorneys assist you in your next property purchase or sale. Don’t let a lien stand between you and your dream home!

About Anselmo & Wojcicki, LLP

Anselmo & Wojcicki, LLP is a multi-disciplinary law practice based in Schaumburg, Illinois, specializing in real estate, estate planning, tax planning, business formation, and the sale and purchase of businesses. Our commitment to our clients and our values set us apart from the crowd. Our team of legal specialists has a wealth of experience and expertise to help you meet your legal needs. We are dedicated to providing quality service and building lasting relationships with our clients.