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 appraisal approach is used to estimate the value of an asset, based on various factors to reach the closest educated guess of the asset. While an appraisal approach does consider the ...

Judicial action to establish property ownership. In a quiet action, adverse claimants are required to state their claims or be forever stopped from any future title claim. The basic ...

Has not been registered on the companies books. It belongs to the person holding it. See also bearer bond; bearer instrument. ...

In conducting a real estate transaction, each party is presumed honest and fair with no deceit. The intentions are honorable and realistic. If deception occurs without prior knowledge, the ...

In real estate, the term "preamble" refers to an introductory statement that outlines the fundamental principles and goals guiding the industry's practices. Specifically, in the National ...

Holder of a real estate license who solicits a prospective buyer of property and receives a commission for his efforts. ...

Aerial navigation that may interfere with a property owner, such as creating undue noise. The value of land near an airport may decline in value for this reason. Further airport congestion ...

In real estate, the basis to set an adjustable rate mortgage, such as a 6-month certificate of deposit (CD) rate, cost of funds index, or prime rate. A statistical measure stated as ...

When answering the question of what is a real estate investor, several aspects should be considered. First, a real estate investor, also known as a real estate entrepreneur, allocates ...

Popular Real Estate Questions