Definition of "Lien"
A lien is a legal instrument by which one party – usually lenders and creditors - guarantees the obligation of a real estate owner to do something – generally repays the money. If that obligation is not satisfied at the right time through the right methods, the lien applicant may be able to seize the property.
In sum, the lien definition is: a legal right of a creditor to sell and liquefy the collateral (the property) of a debtor who defaulted or failed to meet with the terms on whatever contract that lien was connected to. A security interest “hostage”, kept to assure one gets whatever it was invested back.
For instance, liens are commonly applied when someone asks for a bank loan to purchase a car. The bank gives the necessary funds for the person to pay the car company, but holds a lien as collateral. If something happens and the bank doesn’t receive the correct amount in time, they are allowed to execute the lien, seize the vehicle and sell it to recover its losses in the whole transaction. When the person repays the whole loan with no setbacks, the bank releases the lien and the asset becomes free of any lien claims.
A lien can be consensual or non-consensual. That means it can be something that was agreed via contract by the creditor and debtor or created by statute and enforcement of common law; that is: regardless of a contract signed by the debtor, the mere existence of the relationship between the debtor and the creditor, warrants the latter to put a lien on the former. For example, a Homeowner’s Association can put liens on its members for fines, constant late charges, unpaid assessments, attorney fees etc.
Real Estate Tip:
Still not getting 100% of our lien definition? Contact a real estate agent whose eyes have seen a lot, so you avoid unnecessary problems like these!
Popular Real Estate Terms
Factor employed by real estate agents or appraisers to determine the change needed in operating income to obtain a desired rate of return. It is used to evaluate income-producing property. ...
Premiums in insurance and real estate define as a bonus or surplus money. A dividend means a periodic fee you have to pay for your insurance protection. While in real estate, a premium ...
Fibrous, fire-proofing material that was used in buildings and homes for insulation. ...
The external covering finish of a structure which protects it from the elements. Exterior finish materials, including shingles, siding, and paints, are design to resist severe weathering ...
The two terms used to describe professionals in the real estate industry are “realtor” and “real estate agent”. These two terms are used interchangeably or as ...
Gift of real property as stipulated in a will. ...
Tax deduction permitted upon the transfer of property from one spouse to another. The deduction is allowed under the federal gift tax for lifetime transfers or under the federal estate tax ...
Before getting a loan to buy a property, you must know the definition of foreclosure. A foreclosure is the process of making a loan due immediately. Technically, a loan becomes due way ...
Approach to determining a capitalization rate for use in valuating property so as to arrive at a suitable purchase price. To the risk free interest rate is added a risk premium to cover the ...
Have a question or comment?
We're here to help.