Helping Your Client Navigate Real Estate Liens

In advance of closing, clients (whether buyers or sellers) will receive a report from the title company disclosing the liens against the property being sold. A basic understanding liens affecting real estate will aid agents in reading and understanding the title search report.

Mortgage

The mortgage is actually a lien on the property. It is commonly said, “I’m paying my mortgage” or “I want a mortgage payment of less than $800.00 per month.” The fact is that borrowers actually are paying their note or loan. The mortgage is the lien against the property, securing the lender’s right to receive payment on the note. If the borrower defaults on the note, then the lender can foreclose the mortgage.

Mechanic’s Lien

Mechanic’s liens are filed by contractors that perform work on a property and have not been paid. The contractor must file the lien within 60 days from the date on which the last labor or work was furnished or performed on the property. Further, contractors have to follow a very specific set of procedures to perfect their lien. If you have a client that is disputing a mechanic’s lien, you should suggest they consult with legal counsel to determine the validity of the lien.

Tax Lien

Government entities can file a lien against property to secure payment of outstanding tax obligations. Because of the similarity of names, many of the liens are inadvertently recorded against the wrong property. If correctly filed, the lien will have to be liquidated (or other terms reached with the government entity) prior to selling the property.

Judgment Lien

Like a tax lien, the judgment lien is filed by a creditor against a debtor to secure payment of a judgment. The judgment is a court order awarding the creditor a certain monetary sum to be paid by the debtor. Ohio judgment liens become dormant after the period of five years unless the creditor takes certain steps to renew the judgment. Judgments in favor of the state become dormant after ten years.

Broker’s Lien

Commercial real estate brokers can file a lien against property to secure payment of a real estate commission. Only a real estate broker has lien rights. The broker must have a signed written contract for services with the owner or the owner’s agent. The amount of the lien is only for the amount due the broker pursuant to the contract. To perfect a lien the broker must file an affidavit and records it with the county recorder where the property is located and provides a copy to the owner.

In all instances, if a client challenges the validity of the lien, you should recommend they seek the assistance of legal counsel. Unexpected liens can scuttle a real estate transaction. Diligent sellers can view public records on a clerk of courts website and county recorder’s website to determine whether there are any unexpected liens against their property. Understanding the differences between real estate liens can help you to direct your client on options for resolving real estate liens prior to closing.