There are two different types of liens against homes — voluntary liens and involuntary liens. Voluntary liens are security interests that have been granted by the owner, such as a mortgage. However, there are many more types of involuntary liens on real estate than voluntary liens. Below we discuss the different types of liens that may be filed against a home.
• Mortgages — When most people purchase a home, they typically borrow a portion of the sales price. The document filed to secure the loan with the home is a mortgage. Homeowners can have multiple mortgages on a single piece of real estate. If a mortgage has been paid, but not satisfied of record, someone must contact the mortgage company to request that the company research the account to determine if the lien can be canceled. This process can be time-consuming and frustrating, especially for mortgages that have been sold or assigned. Another issue that can make the process difficult is when the bank has closed or changed names.
• Equity Line — An equity line is also a mortgage, but it allows the homeowner to access the equity in the home. Even though the homeowner may have paid the equity line in full, as long as the mortgage is recorded, it is a valid lien on the home.
• Property Tax Liens — If the owner has not paid the property taxes owed on the home, the county can place a property tax lien on the property. Tax liens can accrue interest at a high rate.
• Mechanic’s Liens — Mechanic’s liens, also referred to as contractor liens, are filed against a home by a contractor who performed work but was not paid for the work. Subcontractors who have not been paid may also place a lien against the home. If the home is sold, the lien must be paid in full to transfer clear title. In some cases, a contractor can foreclose on its lien.
• IRS Tax Liens and State Tax Liens — Unpaid income tax liens are another type of tax lien that can create a title problem for potential buyers. The IRS usually attempts to garnish wages or seize bank accounts. However, when the person does not have liquid assets, the IRS or the state may place a lien on the person’s real estate.
• Judgments — When someone receives a judgment against a person, that judgment is recorded in the public records. The judgment attaches to any real estate the person owned at the time the judgment was entered. This type of lien can also be difficult to cancel because individuals holding judgments can be hard to locate and business can close.
• Domestic Support Liens — If a person falls behind in child support payments or alimony payments, a lien can be placed against the person’s real estate. The lien remains on the property until the home is sold or refinanced at which time the lien must be paid in full to convey clear title.
• UCC Liens — Uniform Commercial Code (UCC) refers to a financing statement that secures a lien on personal property. However, when the personal property is a fixture in a home, the UCC can be filed against the real property.
• Unrecorded Municipal Lines — Unrecorded liens for unpaid sewer utility bills or water bills can be placed against the home if the owner does not pay his utility bills.
Title Services protect you when you are purchasing or selling a home. Researching the liens on a home can be complicated, depending on how many owners have held title to the property in the past. To ensure the current owner has clear title, you must also search previous owners to ensure each owner had clear title when he or she transferred the property.
If different types of liens are discovered, it helps to have an experienced team of professionals working to clear the title for you. Using a reputable title services company can protect your investment.