Lien
A legal claim against a property that secures payment of a debt or obligation.
Definition
A lien is a legal claim against a property that serves as security for a debt or obligation. Liens attach to the property title and must typically be paid off (or otherwise resolved) before the property can be sold or refinanced with a clear title.
Common types of liens: mortgage lien (the loan you took to buy the property), tax liens (for unpaid property taxes), mechanic's lien (filed by contractors for unpaid work), judgment lien (from a court judgment against the property owner), and HOA liens (for unpaid association fees).
For investors, identifying all liens on a property is a critical part of due diligence and title search. Buying a property with unknown liens can mean inheriting debts you didn't plan for. A title search and title insurance protect against this risk — title insurance covers claims that weren't discovered in the search.
Related Terms
Title
Legal ownership rights to a property — the bundle of rights that come with owning real estate.
Deed
A legal document that transfers ownership of real property from one party to another.
Due Diligence
The investigation and verification process buyers conduct before committing to a real estate purchase.
Foreclosure
The legal process by which a lender repossesses a property when the borrower defaults on the loan.
Tax Lien
A government claim against a property for unpaid property taxes — investors can purchase these liens and earn interest.