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
The return by owners of a property investment usually through a depreciation allowance. a clause in a contract permitting the prior owner of real estate to recover under certain ...
Primary horizontal support for a structure such as a house. It may be a large piece of wood, stone, iron, or other material that lies across the walls, and serves as support of the ...
The meaning of a grace period refers to a specific time after a payment’s due date. During this period, one can reimburse the amount without penalty, extra costs, or forfeiture. Find ...
Real estate, home and life insurance use numerous ambiguous terms you should know because you can significantly benefit from them. Let’s discover what the word boot usually applies to ...
For real estate investors, the vacancy and credit loss is a way to determine a property’s potential for profit. This value is determined by subtracting the losses brought by vacant ...
Method of eliminating the spaces between the solid fragments in fresh cement or mortar during the mixing process. This is done by a combination of constantly mixing, turning, centrifuging, ...
Welcome to the world of magical yet perplexing real estate! Undeniably, there's a lot to learn, but we're here to explain miscellaneous terminology so that you can make educated decisions. ...
Everyone is aware of the perplexing complexities of a real estate transaction. Enter Opendoor, a company that aims to simplify this experience. If you're a house hunter, seller, real estate ...
Vendee refers to a person to whom something is sold. The meaning of vendee is a buyer of goods and services. A more common term for vendee is a purchaser. While a vendor is a seller, the ...
Have a question or comment?
We're here to help.