What Is a Property Lien?

Property liens are legal claims against a property that serves as security for a debt or obligation. If the property owner fails to satisfy the debt, the lienholder may have the right to enforce the lien, often through the sale of the property. Understanding property liens is essential for both property owners and potential buyers because liens can significantly affect property ownership and transactions.

This blog will help you understand what property liens are, how they work, and how they might impact you if you are buying or owning property in Maryland.

Types of Property Liens and How They Work

Property liens come in various forms, each serving a specific purpose. The most common types of liens include mortgage liens, tax liens, mechanic’s liens, and judgment liens. Each type of lien differs in its origin and enforcement process and are as follows:

• A mortgage lien arises when a property owner borrows money to purchase a home or other property. The lender retains the lien until the borrower fully repays the loan. If the borrower defaults, the lender can initiate foreclosure proceedings to recover the outstanding balance.

• A tax lien occurs when a property owner fails to pay property taxes or other taxes owed to the government. Federal, state, or local tax authorities can place a lien on the property until the debt is resolved. Tax liens take priority over many other types of liens, meaning they must be satisfied first if the property is sold.

• A mechanic’s lien protects contractors, subcontractors, and suppliers who have not been paid for their work or materials provided for a property. These liens are common in construction projects and can be enforced to ensure payment for services rendered.

• A judgment lien results from a court ruling. If someone successfully sues a property owner and is awarded damages, the court may allow the plaintiff to place a lien on the defendant’s property. This lien ensures that the judgment amount is paid, either through direct payment or the sale of the property.

Regardless of the type, property liens create an encumbrance on the property. This means that the property cannot be sold or refinanced without resolving the lien. Potential buyers must be aware of existing liens because they could inherit the debt or face challenges in obtaining clear ownership.

How to Resolve or Remove a Property Lien?

Resolving or removing a property lien depends on the specific circumstances and type of lien. The most straightforward way to clear a lien is by paying the debt in full. Once payment is made, the lienholder must file a release with the appropriate authority to remove the lien from public records.

• For tax liens, property owners may be able to negotiate payment plans with the government agency that placed the lien. This approach allows the property owner to pay the debt in installments, often preventing more severe enforcement actions like foreclosure.

• In the case of mechanic’s liens, property owners may need to work directly with the contractor or subcontractor to resolve payment disputes. If there is disagreement over the validity of the lien, legal action may be necessary to contest it in court.

• Judgment liens often require satisfying the court judgment in full or negotiating a settlement with the plaintiff. In some cases, property owners may file for bankruptcy, which could discharge certain liens depending on the type of debt and the bankruptcy process.

Title companies play a significant role in identifying liens during real estate transactions. They conduct thorough title searches to ensure the property is free of encumbrances. If liens are discovered, they must be addressed before the sale can proceed. Buyers should always review the results of a title search and consult with an attorney to understand any risks associated with purchasing a property with liens.

An Annapolis Real Estate Lawyer at Oliveri & Larsen Protects Your Property

Understanding property liens and their implications is crucial for protecting your property rights and financial interests. Speak with an Annapolis real estate lawyer at Oliveri & Larsen today. Contact us online or call 410-295-3000 to schedule your consultation with our experienced team. We serve clients throughout Annapolis, Ocean City, Anne Arundel County, Baltimore County, Baltimore City, Calvert County, Harford County, Howard County, Kent County, Queen Anne’s County, St. Mary’s County, Worcester County, and the upper and lower Eastern Shores of Maryland.