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

Release of a portion of a property from a mortgage. ...

Arrangement between neighbors permitting one of them to put a beam for support on another neighbors wall. ...

(1) Government seizes private property, but does not provide fair and reasonable compensation for it. (2) Property is seized and the owners rights abolished because of a legal violation. ...

Increase in the value of real or personal property. The price may increase because of a number of factors, such as shortage in supply, improved economy , favorable political environment, ...

The meaning of a disclosure statement is a legal document signed by both parties, the lender and the borrower or buyer. This statement outlines the terms and conditions, the potential ...

Money payments to be delayed for a future date or extended over a period of time. ...

The Federal Reserve Bank's regulation applying to the amount of credit that may be advanced by brokers and dealers to customers to buy securities. ...

Real annual return on a real estate investment. It equates the initial investment with the present value of future net cash inflows from the investment. The IRR can be determined by using a ...

Written enumeration of the desired selling prices associated with homes or office buildings for sale. The prospective buyer can then determine if the properties for sale are within his ...

Popular Real Estate Questions