Definition of "Lien"

Nancy Osborne real estate agent

Written by

Nancy Osborneelite badge icon

Keller Williams Real Estate

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!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

The person to receive the benefits of a trust when distribution occurs. Secondary beneficiaries may be nominated if the primary beneficiary predeceased the trust distribution. The ...

Process of conferring and consulting with clients concerning real estate investments and developmental projects. See also American Society of Real Estate Counselors (ASREC). ...

Simulation that enables investors to determine variations in the rate of return on an investment property in accordance with changes in a critical factor. It is an experiment with decision ...

Abusive tax shelters are a consequence that resulted from Congress allowing losses of revenue to be used for tax benefits. They are a side-effect of tax deductions that companies are ...

Optional feature included in some homeowners insurance policies that pays the replacement cost of any personal property. ...

A knowledgeable person authorized to aid in the underwriting of property and casualty insurance. ...

The vertical elements of a door or window frame which provide vertical support to the overall frame. ...

The definition of Fair Market Value in the real estate business is the highest amount that could be received on the sale of a property when there are a willing buyer and a willing seller. ...

The number of units currently occupied in a facility, neighborhood, or city, stated as a percentage of total capacity. For example, a hotel has 80 rooms available for guests. Its average ...

Popular Real Estate Questions