wealtheducation-what_is_a

What is a Lien?

A lien is a legal claim or a "hold" on some type of property, whether personal or real property, making it collateral against monies or services owed to another person or entity. A lien usually exists in situations like second mortgages, loans against a vehicle title, or money loaned against any other substantial item owned by a borrower. It may keep the borrower from selling the property, or at least keep him or her from transferring title to the property.

Any property that carries a lien can be forced into sale by the lender, in order to collect what is owed, if the loan is in default. If the borrower decides to sell the property, the lien holder must be paid before the title will be cleared for transfer to the buyer.

There are different kinds of liens, and one of the most common is a mechanic's lien, also known as a construction lien. This type of lien is put into place when the property owner owes money for materials or labor which improved the property in some way. This can include repairs, maintenance, and new construction, as well as things like landscaping and renovation.

When purchasing real estate, it is important to make sure there is no lien on the property that will keep you from securing a clear title.