Eliza Theiss 
Editor’s Note: This article was updated on July 13, 2023.
Liens are one of the oldest forms of legal rights dating back thousands of years. In the world of property ownership and financial transactions, a lien is a legal claim or encumbrance placed on an asset — typically a property — to secure a debt or obligation owed by the owner.
What is a lien?
A lien is the legal claim a person or entity has on another person’s property as collateral for debt or financial obligations. Liens function as a safeguard against unpaid debt for lenders, creditors and service providers by granting them an interest in the property.
If the debt is not paid off or is not paid within the agreed-upon timeframe, the lender has the right to take legal ownership of the property or force its sale to recover unpaid debt. Usually, liens are placed on real estate properties, but they can also be put on other types of assets, as well, like vehicles.
What is a lien on property?
A property lien is a legal claim or encumbrance placed on a property to secure a debt or obligation. It gives the lienholder the right to seek repayment by forcing the sale of the property if the debt is not repaid. Property liens are the most common forms of liens.
There are two types of liens:
- Consensual liens are liens that both the borrower and the creditor enter into willingly, such as a mortgage loan.
- Involuntary liens are liens that the creditor places on the borrower’s property without the borrower’s agreement. These are typically placed on real estate property for unpaid debt in order to recover the remaining financial interest. If the lien is not paid, the creditor has the right to take full ownership of the property — for example, in the case of foreclosures — or claim a partial interest and force the sale of the asset to recover the remaining debt.
What is a lien on a house?
A lien on a house is a legal claim on residential property — in this case, a single family detached home. A lien on a house can originate from mortgage loans; unpaid taxes; outstanding payments for contractors and building materials; or even debt from unpaid child and spousal support. If the lien is not paid in time, the lender or creditor can force the sale of the house to reclaim their loan.
The most common type of lien on a house is a mortgage loan. This falls into the category of consensual liens because both the lender and the borrower — in this case, the owner of the house — willingly entered into the mortgage contract. If the homeowner defaults on the mortgage, the lender can initiate foreclosure proceedings to recover the debt. This will result in the property being taken over by the lender and put on lien sale, usually at a public auction held at the county courthouse. Then, if a property fails to sell at auction, it becomes a real estate owned (REO) property. REO properties can usually be bought from REO agents or through an auction platform.
What is a lien sale?
A lien sale — also known as a fire sale — is the sale of the claim the creditor has on the property that was used as collateral for the unpaid loan. Certain investors and companies specialize in buying liens (such as mortgage liens), but, generally, a lien sale refers to the sale of the property that the lien is attached to.
Lien sales usually take the form of public auctions, usually at the county clerk’s office or courthouse. Anyone can bid at a lien sale as long as they have the required security deposit on hand, should they win the auction. Then, the auction’s winner has a specified legal timeframe in which to pay the remainder of the lien sale’s price or they lose their interest in the property that the lien is attached to. In such cases, the new buyer may also lose the full or partial security deposit while the property goes back to the auction block.
What are the most common types of liens?
The most common types of liens are:
- Mortgage liens
- Judgment liens
- Tax liens
- Mechanic’s liens
- Building code violation liens
- Common charge liens
Other, less-frequent types of liens include:
- Environmental liens
- Spousal or child support liens
- Municipal liens
- State and federal tax liens
- IRS estate tax liens
What is mortgage lien?
More commonly referred to as lis pendens or pre-foreclosures, these are issued against properties that are delinquent on their mortgage payments and may face foreclosure. If mortgage-distressed properties are part of your investment rider, make sure to explore PropertyShark’s dedicated section for NYC pre-foreclosures.
What is a judgment lien?
A judgment lien is a lien typically issued when the property owner loses a lawsuit and receives a judgment for monetary compensation. If the property owner is unwilling or unable to pay the monetary compensation in full, the winning party has the right to file a lien on the property to secure the owed amount. The monetary compensation is then usually recovered through a lien sale — a type of property sale that happens at public auctions.
What is a tax lien?
A tax lien is issued for unpaid property taxes by the appropriate government agencies and authorities and can result in the government selling the property to recoup outstanding taxes. These can include federal, state, municipal, IRS tax and IRS estate tax liens.
What is a mechanic’s lien?
A mechanic’s lien — also known as a contractor’s lien — is a type of lien filed by contractors, subcontractors, material suppliers, and various service providers involved in construction, redevelopment, renovation, or maintenance projects for which they have not been paid or have not paid in full.
What is a building code violation lien?
A building code violation lien is a lien placed on property when the owner fails to comply with local building codes and regulations. If a building code violation is determined by the local building department, the property owner receives notices of violations and often some form of penalty. Then, if they fail or refuse to rectify violations and pay any associated penalties, a building code violation lien is placed on the asset and may end up forcing a lien sale.
What is a common charge lien?
A common charge lien — also referred to as an HOA lien — is a lien filed against the property by the co-op, condo, or homeowners’ association that the property is part of in order to recoup unpaid common charges or penalties issued for violating the association’s rules.
Common charges are the expenses of operating and maintaining shared spaces and amenities, as well the building itself (in the case of co-ops and condos) and are charged to all members of the association.
What is an environmental lien?
An environmental lien is a lien issued for environmental violations, hazardous waste disposal or various types of contaminations. If the responsible party fails to rectify the violation by cleaning up the contamination and/or does not pay penalties issued for their violations, an environmental lien is placed on the property/site.
What is a spousal or child support lien?
Spousal and child support liens are liens placed on the property of an owner who has failed to pay their court-mandated alimony or child support dues.
What is a municipal lien?
A municipal lien is a lien placed on real estate property when the owner has failed to pay water and/or sewage bills; municipal special assessment taxes, such as mosquito abatement taxes; and any other municipal bills and fees. Building code violation liens are another type of municipal liens.
What is a state tax lien?
A state tax lien is a lien placed on real estate property when the owner has failed to pay state taxes, such as income taxes, sales taxes or any other state-level taxes.
What is a federal tax lien?
A federal tax lien is placed on real estate property when the owner has failed to pay federal taxes. Usually, federal tax liens are claimed by the IRS.
What is an IRS estate tax lien?
An IRS estate tax lien is placed on real estate property within the estate of a deceased person when federal estate taxes have not been paid.
It’s important to understand that liens are against the property itself, not the owner of the property. As a result, if a buyer takes on a home with an unsatisfied lien, then the lien becomes the responsibility of the new owner. This is why it’s crucial to thoroughly research and check for liens on a property that you may be interested in buying.
How Do I Get Rid of a Lien?
The easiest way to get rid of a lien is to pay the outstanding debt in full, as well as any penalties or fees associated with falling behind on payments or the issuance of the lien. Another way to get rid of a lien is to contest in court, should you feel that the lien is baseless.
FAQs
What is the most common type of lien?
The most common type of lien is a mortgage lien. A mortgage lien represents a legal claim on a property granted for the lender to secure their loan should the borrower fail to pay it. A mortgage lien is issued when the borrower secures financing from a lender in order to buy a home or any other kind of real estate property. Mortgage liens give the lender the right to foreclose on the property if the loan is not repaid according to the agreed-upon terms.
What is the most common lien on real estate?
The most common lien on real estate is the mortgage lien, which represents the lender’s legal claim to the property should the borrower fail to repay the mortgage loan according to their contractual agreement.
What are the different types of liens?
There are many different types of liens, including: consensual or involuntary liens; mortgage liens; judgment liens; tax liens; mechanic’s liens; agricultural liens; HOA liens; spousal and child support liens; estate tax liens; environmental liens; municipal liens; state tax liens; federal tax liens; and more.
Conclusions
One of the most common causes of delays in real estate transactions is the discovery and handling of liens: Recorded claims against a property will usually tie up the property in legal proceedings and make it difficult to sell and almost impossible to refinance. If a lien progresses to a lien sale, the former owners will not only lose that property, but will also see a significant decline in their credit score, as well as their future ability to secure a loan or secure one at an average rate.
PropertyShark allows you to research liens on all New York properties. In fact, you can find all liens associated with a property in just one minute. Simply search for your target address, click the “Documents” tab on the full property report and scroll down to the “Liens” section. This will show you an up-to-date record of all liens tied to the address, as well as their type, amount, expiration date and more.
Disclaimer
Information provided on this page is purely informational. It is not and should not be regarded as investment advice.
