How To Analyze A Property Lien

  • June 25, 2024
  • 5 min read

Property Liens: Understanding the Basics
This is Dave Panelli, certified title abstractor and examiner, today talking about property liens. What is a lien on a property? First of all, make sure we understand the exact spelling of this. It’s “lien,” not “lean” like you’re leaning on something. A lien is a recording on a piece of real estate which encumbers that real estate by a claim.

Types of Liens
A lien is a recording on a piece of real estate which encumbers that real estate by a claim. Now, the claim can come from a debt, it could come from some type of obligation or requirement, and we’re going to talk about four or five different kinds of liens. We’re going to talk about mechanics liens, we’re going to talk about tax liens, we’re going to talk about environmental liens, and the most common type of lien that everybody knows about is a mortgage.

Mortgage vs. Tax Lien
You may not think of it this way, but a mortgage is actually a type of a lien. What’s the difference between a mortgage lien and, let’s say, a tax lien? They encumber the property exactly the same way, meaning the property has a claim on it until the lien is paid. The big difference is the mortgage lien is a voluntary lien.

Priority of Mortgages
What determines the order of priority, whether it’s a first lien or second lien, is exclusively determined by the order of recording, the date of recording. Whoever records their mortgage first becomes the first mortgage, whoever records it second becomes a second mortgage.

Details in Mortgage Records
Some mortgages or liens will have a description of the type of loan, like a line of credit, but most of them are just recording the debt. For example, if a person takes out a 30-year loan at 7% interest and this is their payment, none of that gets recorded on the lien.

Mechanics Liens
Mechanics liens are when you hire somebody to work on your property, a contractor, repair person, electrician, and you don’t pay the bill. In many jurisdictions, this also applies to delivery of materials.

IRS Tax Liens
Let’s talk about another type of lien which is very common, which is a tax lien. IRS tax lien from the Treasury Department. You don’t pay your income tax, they’re going to slap a lien on your house.

Judgment Liens
Let’s talk about a related type of lien that is similar in terms of it’s a blanket lien which is a judgment lien if you are sued in court in the county where your property is and you lose your lawsuit somebody sues you for $10,000 cause your dog bit them and they sued you and they win they get a judgment that judgment gets recorded in the land records and it automatically encumbers any property the person does not normally in most counties have to go to the extra step to record against a particular property it’s recorded land records County Clerk boom it’s on your property.

Environmental Liens
Next we’re going to talk about an environmental lien. Well what’s an environmental lien? Well it’s a little bit of a gray area if you’re selling a commercial property the buyer probably wants an environmental sight assessment or a phase one esa which includes environmental lien search they want to make sure there’s no toxic waste or any prior claims against that property that have anything to do with environmental issues asbestos oil chemicals anything and that will be recorded as a very specific type of lien that has that specification on there.

Mechanics Liens
Another type of lien is a mechanics lien. Mechanics lien is when you hire somebody to work on your property a contractor repair person electrician and you don’t pay the bill.

Mechanic’s Liens Protection
How do you protect yourself as a property owner or Builder or somebody who’s doing it from a mechanics lien because it could also come from a subcontractor let’s say if you hire a general contractor Joe’s Builders to build an addition on your house you pay him $100,000 they put that addition on but Joe didn’t pay the lumber yard Joe didn’t pay the plumber that plumber or Lumberyard can go back and slap a lien on your property for something you already paid Joe for so you have to make sure you get what’s called lien waivers from all the subcontractors that did work on the property to make sure that after you pay Joe you’re not going to be out having to pay a double Bill to somebody who did not get paid by Joe the general contractor see how that works which leads us to our last subject of liens which is a lien release.

Lien Releases
How do you get these liens off of property somebody files a lien on your property somebody has a mortgage on your property you have a tax lien and you paid it you want to get it off you want to make sure that you get from that lien holder a lien satisfaction or lien release it’s another document it has to be recorded in the property records in order for it to cancel out that lien.

Conclusion
Thank you for watching another episode of Actual Human Advisory on Describe TV. Remember we have live one-on-one consultation appointments available at ActualHuman.com where you can book a one-on-one undivided attention live call with a licensed investigator a licensed insurance broker a licensed mortgage broker real estate broker ER I’m also a certified real estate title examiner a certified civil court mediator along with having developed and started over 15 businesses several of which were sold for millions of dollars so if you do have questions in any of those categories you can arrange a one-on-one live video consultation use the link below and we’ll see you on the next video.

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