{"id":158487,"date":"2023-09-21T08:28:08","date_gmt":"2023-09-21T14:28:08","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=158487"},"modified":"2023-09-21T08:28:10","modified_gmt":"2023-09-21T14:28:10","slug":"what-is-a-lien","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien","title":{"rendered":"What Is a Lien in Real Estate?"},"content":{"rendered":"\n<p>A lien is a financial claim that a person or company has on a property. Liens are generally placed on real property, such as homes and commercial buildings, but they can also be placed on other forms of property, such as cars, investments, and business equipment.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Do Liens Work?<\/h2>\n\n\n\n<p>The word \u201clien\u201d comes from the Latin word <em>ligare<\/em>, which means \u201cto bind\u201d\u2014so a lien binds a debtor to the property.&nbsp;<\/p>\n\n\n\n<p>Like a boat anchor, liens are financial anchors that hold a property back until released. They limit what can be done with a property, including selling it.<\/p>\n\n\n\n<p><strong><em>Related: <\/em><\/strong><a href=\"https:\/\/www.biggerpockets.com\/blog\/property-lien-search\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><em>Property Lien Search: How to Search for Liens on Property<\/em><\/strong><\/a><\/p>\n\n\n\n<p>In fact, liens give the creditors legal rights, which can include foreclosing on the property and selling it to satisfy the lien.<\/p>\n\n\n\n<p>Getting a lien requires making a court filing in the county where the property is located. Different localities and states have different laws and procedures around filing liens.\u00a0\u00a0<\/p>\n\n\n\n\n\n\n  <div class=\"lg:block\" x-data=\"{ ad_block_block_650c50e69a71e: popAds(1) }\">\n      <template x-for=\"ad in ad_block_block_650c50e69a71e\">\n        <a\n          :href=\"ad.linkURL\"\n          class=\"no-underline text-black\"\n          x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien', ad.sponsor, ad.title, ad.id, 'blockAdClicked', 'blockAd', '')\"\n          target=\"_blank\">\n          <div\n            class=\"py-4 border-b flex flex-col flex-nowrap text-sm border-t px-0 rounded-none\"\n            x-init=\"\n              analytics.track('blockAdLoaded', {\n                referrer: 'https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien',\n                sponsor: ad.sponsor,\n                ad_title: ad.title,\n                ad_page_location: ''\n              })\n            \"\n            x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien', ad.sponsor, ad.title, ad.id, 'blockAdViewed', 'blockAd', '')\">\n            <div><span class=\"text-xs text-slate-light block bg-slate-50 p-1 inline-block rounded-md\">Sponsored<\/span><\/div>\n            <div class=\"flex items-center text-sm space-x-4\">\n                <img :src=\"ad.imageURL\" :alt=\"ad.imageAlt\" class=\"h-10 w-10 object-cover rounded-full\">\n\n                <div clas=\"text-sm\">\n                    <span class=\"font-bold block\" x-text=\"ad.sponsor\"><\/span>\n                    <span class=\"text-slate\/80\" x-text=\"ad.description\"><\/span>\n                <\/div>\n            <\/div>\n\n            <div>\n                <span class=\"font-bold\" x-text=\"ad.title\"><\/span>\n                <p class=\"mt-2 text-slate\/80\" x-text=\"ad.body\"><\/p>\n                <span class=\"mt-2 text-themeBlue block mt-2 underline\" x-text=\"ad.linkTitle\"><\/span>\n            <\/div>\n          <\/div>\n        <\/a>\n      <\/template>\n  <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Different Types of Liens<\/h2>\n\n\n\n<p>Liens can either be consensual or nonconsensual (also known as statutory).&nbsp;<\/p>\n\n\n\n<p>Consensual liens (also known as a voluntary lien) are ones you agree to\u2014like when your home or car serves as collateral for a mortgage or auto loan. For example, a mortgage lien remains on your home until the debt is paid.&nbsp;<\/p>\n\n\n\n<p>Nonconsensual or involuntary liens, meanwhile, are put on a property because of outstanding debt. There are several common types of nonconsensual liens:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Mechanic\u2019s liens<\/h3>\n\n\n\n<p>A mechanic\u2019s lien is generally levied by a contractor or subcontractor for unpaid work on a home or property. In order to put a mechanic\u2019s lien on the property, the contractor or subcontractor needs to go to court to get a judgment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax liens&nbsp;<\/h3>\n\n\n\n<p>Tax liens are statutory liens for unpaid taxes placed by the taxing authority: either a federal, state, or local government. One common example is property tax liens. These liens must be paid before mortgages.&nbsp;<\/p>\n\n\n\n<p>An Internal Revenue Service (IRS) tax lien attaches to all current and future assets, including personal property, motor vehicles, and investments. A federal tax lien in the United States will rarely be a surprise: The IRS will send a notice of tax due and demand payment before placing a lien.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Judgment liens<\/h3>\n\n\n\n<p>A judgment lien can be awarded by judges if someone files a lawsuit for money owed and wins. Filing a judgment lien on the property as part of the judgment might be the only way to collect the money due.&nbsp;<\/p>\n\n\n\n<p>A judgment lien is commonly awarded in small claims court cases.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Attorney\u2019s liens<\/h3>\n\n\n\n<p>Attorney\u2019s liens ensure payment for legal bills. This type of lien, often used in personal injury cases, ensures the attorney is paid necessary legal fees out of the client\u2019s award.<\/p>\n\n\n\n<p>While these types of liens are most common, there are others that could impact you.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Lien vs. Encumbrance<\/h2>\n\n\n\n<p>An encumbrance is, broadly, a third-party claim against your property.&nbsp;<\/p>\n\n\n\n<p>A property lien is an encumbrance, but not all encumbrances are liens\u2014liens are the only financial-related encumbrance. They\u2019re also the most common encumbrance.&nbsp;<\/p>\n\n\n\n<p>Other encumbrances include deed restrictions, easements, and encroachments, which can place restrictions on how an asset can be used or limit the transfer of the property:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Deed restrictions limit the use of a property, such as limiting changes to historical elements of a home.&nbsp;<\/li>\n\n\n\n<li>Easements give a third party a legal right to use the land\u2014utility companies, for example, generally have easements to assess equipment and construct power lines.<\/li>\n\n\n\n<li>Encroachments are when another property owner\u2019s structure intrudes on your land.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Removing Liens From a Property<\/h2>\n\n\n\n<p>The easiest way to get a lien lifted is by payment of a debt. Alternatively, the lien holder and property owner can agree to a repayment plan on the condition that the lien holder remove the lien.&nbsp;<\/p>\n\n\n\n<p>Although liens are secured loans, some can be discharged in bankruptcy.<\/p>\n\n\n\n<p>Selling or foreclosing on the property can also satisfy a lien\u2014the sale proceeds will be used to pay the debt holder. However, this can hurt the property owner\u2019s credit rating if the lean was nonconsensual.&nbsp;<\/p>\n\n\n\n<p>If the owner sells the property, they must pay off the liens. For example, a financed car will have a lien attached to the title. In order for the individual to sell or trade in the car, the remaining debt must first be paid to the lender.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Tax Lien Investing as a Real Estate Strategy<\/h2>\n\n\n\n<p>Investing in tax liens is an alternative real estate strategy that can offer high returns. However, it&#8217;s a sector that requires specialized knowledge and a proactive approach to minimize risk.&nbsp;<\/p>\n\n\n\n<p><strong>Related: <\/strong><a href=\"https:\/\/www.biggerpockets.com\/blog\/tax-lien-investing\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><em>Tax Lien Investing: How To Find Tax Delinquent Properties Near Me<\/em><\/strong><\/a><\/p>\n\n\n\n<p>Here are the steps for getting started:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Understand what a tax lien is<\/h3>\n\n\n\n<p>Before diving in, it&#8217;s crucial to understand what is a lien. A tax lien is a legal claim by a government authority against a property when the property owner fails to pay taxes on it. The lien secures the government&#8217;s claim on all proceeds from the sale of the property, and in some cases, an investor can acquire the property itself.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2.&nbsp; Research the rules and regulations<\/h3>\n\n\n\n<p>Tax lien laws vary by state, so familiarize yourself with the rules, interest rates, and redemption periods that apply in your area of interest. Some jurisdictions have online resources, or you can consult with legal professionals experienced in tax lien investments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Assess the risk and return<\/h3>\n\n\n\n<p>The returns on tax liens can be enticing, but they are not without risk. Assess the property condition, neighborhood, and market trends. A detailed due diligence process can help you gauge the potential returns against the risks involved.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Attend tax lien auctions<\/h3>\n\n\n\n<p>Tax liens are often sold through public auctions. You can attend these either in person or online. Be sure you set a budget beforehand and stick to it to avoid overbidding.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Monitor your investment<\/h3>\n\n\n\n<p>Once you own a tax lien certificate, it&#8217;s critical to monitor your investment. Keep track of the redemption period, during which the homeowner can repay the back taxes, with interest, to reclaim their property. If the period expires without payment, you may have the option to foreclose on the property.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Exit strategy<\/h3>\n\n\n\n<p>Have a clear exit strategy in place. Whether it\u2019s collecting on the lien plus interest, obtaining the property through foreclosure, or selling your lien to another investor, knowing your end game will help you manage your investment effectively.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">7. Rinse and repeat<\/h3>\n\n\n\n<p>After you&#8217;ve completed one successful tax lien investment, assess what you&#8217;ve learned and apply it to future investments. This is a sector where experience and specialized knowledge can significantly boost your returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>In general terms, a lien is a way of saying that someone owes money. Liens can be attached to things like houses, cars, or other valuable items. Knowing how liens work can help you in two ways.&nbsp;<\/p>\n\n\n\n<p>First, it can protect you from getting into trouble with your own property. And second, you can make money by investing in certain kinds of liens.&nbsp;<\/p>\n\n\n\n<p>Now that we\u2019ve answered the question \u201cwhat is a lien,\u201d you\u2019re in a better position to make informed decisions regarding your own property or when investing.<\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_183e22b7297d2238acbbb7a5c88e493c\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_28c14fd13ee38dca2fbb15036048d971\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_af162d58db7b94daed8cf61931f4fe1a class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/agent\/match\"\n        x-on:click=\"window.analytics.track('Blog Block | B2C Marketplace Agent Finder', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/signup\"\n        x-on:click=\"window.analytics.track('Blog Block | Acquisition | Free Membership Signup', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/what-is-a-lien',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>We&#8217;ll explain the different types of liens and what they mean for investors.<\/p>\n","protected":false},"author":613667,"featured_media":158489,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-158487","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/158487","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613667"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=158487"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/158487\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/158489"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=158487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=158487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=158487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}