What Is a Lien? Your Questions, Answered

Are you thinking of buying a home that’s foreclosed or from an auction house? It might seem like a deal that’s too good to be true at first, but you need to ensure that the property doesn’t have any liens on it, so you don’t end up paying for someone else’s mistakes. 

But what is a lien? There are many different kinds of liens out there, like, construction liens, tax liens, mortgage liens, and municipal liens. Tax liens can also be an investment tool and can allow you to purchase properties on the cheap.

Let’s keep reading to find out more about what is a construction lien and how does a lien work exactly. 

What Are Liens in Construction? 

A lien, at its essence, is a claim or legal right against assets that are used as collateral to pay off a certain debt. For example, the previous owner of your home might have hired a construction company to do some repairs or renovations on the house. But before they paid the company what was owed, they might have gone bankrupt or foreclosed or skipped out on the payments. 

Now there is a construction lien on the house, and even though you weren’t the one who ordered those repairs or renovations, the liens are on your house and need to be paid by you. That’s why it’s so important to check properties for any outstanding liens before purchasing them.

How Do Construction Liens Work?

The problem with liens of all kinds is that if the amount owed is not paid, the creditor (the construction company in the above example) has the right to seize the asset that is the subject of the lien. They have the right to go to court and get a judgment against the non-paying party. 

You can imagine how much of a shock that would be to you, as the new owner, if a construction company declares that they can take over your property because the previous owner didn’t pay some bills. 

The good thing about liens of all kinds is that they are public records. So anyone interested in purchasing an asset or collateral can check if a lien needs to be released before purchasing the property. 

Some companies can help you get a lien waiver. This allows you to get legal protection and increases accountability in the construction industry. Everyone in the home building or contractor field needs to know about these. 

What Is a Lien? – It Can Be a Massive Headache If Not Attended To Properly

As seen above, liens of all kinds can turn into a huge issue and a danger to your ownership of certain assets, if not taken care of appropriately. Keep what is a lien in mind next time you think about purchasing a property and don’t get caught in the dangerous web of construction liens.

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