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What Is a Lien?

In a nutshell, a lien is a legal claim on property. It is often used in the context of second mortgages or loans, in the sense that when someone turns a vehicle or a house into collateral, he is not allowed to sell the property or transfer its title to somebody else. However, not all liens have to do with loans. In a mechanic’s lien/construction lien the owner of the property owes money for the renovations, such as repairs on the buildings or landscaping of the grounds.

A lien allows the lender to have some say on the property. For example, the lender can insist on having the property sold in order to collect on a loan that has defaulted. Once that property is sold, the debt must first be paid before the new owner can get the title. Anyone who has been duped into buying the property – without being told of existing liens – will discover that it can’t be transferred, or that some previous amounts must be paid.

That is why it is important to check whether or not there is a lien on the property before purchasing it. Companies can be hired to conduct a title search (also known as "abstract of title") where they will go through public documents to see of any existing claims. The title search should have a thorough and legally accurate description of the land and the structures on it. Many institutions require a title search before approving owner financing or other land contracts.

Without conducting a thorough investigation, it is possible to buy property without getting a “clean” or “lien-free” title.

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