What is a lien on a property?

Voluntary and involuntary liens

• Voluntary liens are created by the owner's agreement. A mortgage or deed of trust is the most common: the lender gets a lien in exchange for the loan. Home equity loans and lines of credit add further voluntary liens.
• Involuntary liens are imposed by law without the owner's agreement, usually because of an unpaid debt.

Common types of liens

• Mortgage lien — secures a home loan; enforced by foreclosure if the borrower defaults.
• Property tax lien — arises automatically for unpaid local property taxes and usually has priority over almost every other lien, including the mortgage. In many states the lien can be sold to investors, who may eventually foreclose or take a tax deed.
• Federal tax lien — the IRS files a notice of federal tax lien when income or other federal taxes go unpaid; it attaches to all the taxpayer's property.
• Mechanic's lien (construction lien) — filed by contractors, subcontractors or suppliers who were not paid for work or materials on the property. Strict deadlines apply, often 60 to 120 days after work ends. A homeowner can face one even after paying the general contractor, if that contractor failed to pay a subcontractor.
• Judgment lien — when a creditor wins a lawsuit, it can record the judgment in the county where the debtor owns real estate, creating a lien.
• HOA lien — for unpaid homeowners' or condominium association dues; in some states part of it takes priority even over the mortgage.
• Child support lien — for overdue support in many states.
• Medicaid estate recovery lien — in some states, against the home of a Medicaid recipient.

Priority: who gets paid first

When a property is sold or foreclosed, liens are generally paid in order of recording — “first in time, first in right” — except that property tax liens and certain other statutory liens jump to the front. That is why a first mortgage is paid before a later home equity loan, and why lenders insist on title searches and subordination agreements.

How a lien affects the owner

A lien does not change who owns the property, but it clouds the title. In practice, you cannot sell or refinance without paying off or otherwise resolving the liens, because buyers and lenders require clear title and title insurers will not insure over them. Some liens, such as mortgages and tax liens, can lead to foreclosure if unpaid.

How to find liens

Liens are recorded with the county recorder, register of deeds or county clerk, and many counties offer online searches by owner name or parcel number. Federal tax liens and some judgments may be recorded with the county or the secretary of state. A title company search before a purchase will find recorded liens and list them in the title commitment.

Removing a lien

1. Pay the debt and obtain a signed release or satisfaction of lien, then make sure it is recorded.
2. Negotiate a reduced payoff or payment plan, especially for judgment and mechanic's liens.
3. Dispute an invalid lien — a mechanic's lien filed late or for work not done can often be removed through a court petition, sometimes with penalties against the filer.
4. Bond around it — some states let an owner post a bond so the lien moves from the property to the bond.
5. Bankruptcy — can eliminate some judgment liens that impair a homestead exemption, but does not remove most mortgage or tax liens.
6. Wait out the time limit — some liens expire if not enforced within a set period, though judgment liens can often be renewed.

Buying property with a lien

Liens normally stay with the property when ownership changes. In a standard sale, the title or escrow company pays them from the seller's proceeds at closing. A buyer at a foreclosure or tax sale must be especially careful, since senior liens may survive the sale.

Getting help

A real estate attorney can search title, challenge improper liens, negotiate releases and advise on priority questions. Owners facing tax liens should also consider a tax professional, since the IRS offers installment agreements and, in some cases, lien withdrawals.