Lien

A lien, in its broadest sense, is a legal claim upon a piece of property to secure the payment of a debt. A lending institution, for example, has a real estate lien of a home that somebody has mortgaged. A mortgage allows an individual or business to buy property without paying the full value upfront. With a mortgage contract, the lender is given the legal title of the property, the lien, while the borrower retains the equitable title. When the debt is eventually paid, the lien is removed.

A lien can be consensual—as in a real estate situation—or non-consensual—as in a tax situation. They are also either “perfected” or “unperfected” meaning that, in the “perfected” situation, the creditor has given notice to third parties of his interest in the property. Being aware of who has a claim on a piece of property is one of the most important things to do before buying an investment property, particularly if you are planning to buy a foreclosure.

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