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
A binding arbitration is a way to solve disputes without going to court. An alternative to the more expensive and lengthy legal procedures, a binding arbitration is basically the process ...
A legal procedure to sell a mortgage property to the highest bidder in order to satisfy a mortgage claim from a mortgagee against the value o the property. A foreclosure sale can occur from ...
Series of sloping horizontal slats most frequently mounted in doors and windows permitting the passage of air while restricting vision and preventing rain from entering the building. ...
Language commonly used in a fee simple title conveyance. The significance is whether the title is clear and can be passed on to the purchaser's estate including all heirs and those who may ...
(1) The interest rate charged on a construction loan. (2) The rate at which construction loan progress payments are made. See also bridge loan; bullet mortgage; development loan. ...
person's behavior partly genetic and partly learned through experience over time. Some people have good personal traits while others have poor ones. ...
In everyday discourse, a merger defines the combination of two entities, be it real estate or two companies, into a single and legit one. We should make a difference between a merger and ...
Same as term financial institutions: Institutions acting as intermediaries between suppliers and users of money. The financial markets are where those wanting funds are matched with those ...
Interest rate on a loan that varies periodically based on some related measure. If interest rates are currently high and a prospective buyer of a home believes future interest rates will be ...
Have a question or comment?
We're here to help.