An encumbrance against real property, typically used to secure payment for a debt, taxes, legal judgment or mortgage. The lien can be made against a specific property or against an owner, making it apply to all properties owned. The lien is a legal document that forces the owner to pay off debts. A lien is most often filed by banks and lenders for mortgage purposes. The property cannot be sold without the lien being removed by the person or organization that placed it. A bank or mortgage lender will file a “certificate of satisfaction” when the mortgage is paid in-full, which removes the lien. Other liens include a “mechanic’s lien” which is filed by a contractor or repairman to guarantee payment for services rendered, a “utility lien” which is filed by a utility company (like water/sewer authorities) when their bills are not paid on-time, a “tax lien” which is filed by the local government when taxes are not paid or in the case of apartment buildings, a “wrongful housing lien” which is filed by a government housing authority when the owner fails to maintain the property according to the local housing code. Liens “cloud the title” to a property, making them unattractive to investors or potential buyers. In order to sell the property, all the liens must be removed; thus making the title “free and clear”. If they are not removed, the property cannot be legally sold without the debts being paid off first. All liens are arranged in order by the date they were placed. This is called “position”. A mortgage, mechanics lien and tax lien would be in first, second and third position, respectively. If the liens are not removed and a property is sold, the proceeds from the sale are applied to all liens. Any remaining money is then given to the seller. Most often, liens are resolved by the owner prior to sale.
