When there is a lien on a property, it means that there is an outstanding debt. The other party has placed a lien on the real estate, so the debt needs to be satisfied before that real estate can be sold.
This can significantly complicate a transaction. For example, you could put an offer in on a home without knowing that there is a lien on the title. Your offer could be accepted, but if the lien is then uncovered, the seller cannot actually transfer the home into your possession. The title has to be cleared by paying off the lien first.
At best, this extends the amount of time it takes for you to purchase the house. At worst, it derails the entire transaction and you have to look for another property.
2 common types of liens
One of the most common liens is known as a mechanic’s lien. This is often used by contractors and subcontractors. It essentially means that they have done work on the property and were never paid.
For example, perhaps it is an older home that was renovated, and an electrician was hired to run new lines throughout the house. It was a very expensive and time-consuming job, but they were never paid for their efforts. They could have a mechanic’s lien on the property because their work has directly contributed to the value of that house and they deserve appropriate compensation.
Another example is a tax lien. If the owner of the home has not been paying property taxes, the government may place this lien, and the tax debt has to be satisfied before a sale. The money is owed to the government directly, rather than being owed to a private business.
Navigating complex transactions
This is just one potential title issue that can create a complicated real estate transaction. If you find yourself facing these types of issues or any others, it can help to work with an experienced real estate lawyer to seek a resolution.