What is a Lien, and How Do You Search for Lien Records?

There are several kinds of liens, each with nuances and legal implications. A bank, government, or small business can put liens in place. Because of the detailed nature of liens, many people question what liens are, how to find them, and other things they need to know about them. Often, business owners need to know if there are liens against a business or customer they might work with, as this can seriously impact their decision.

Everything You Want to Know About Liens

So, keep reading if you want to know more about this topic and have these key questions answered:

  • What is a lien?
  • What are the different types of liens?
  • How do I search for liens?
  • Does a lien hurt your credit?
  • Is a lien the same as a loan?
  • How do I remove a lien?
  • What does having a lien on your business mean?

What is a Lien?

Here’s a straightforward definition: a lien represents a legal claim or hold on property that secures the payment of a debt or fulfillment of some obligation. They’re essential to be aware of because they can limit what you do with your property or even take it away entirely.

Recognizing and understanding liens are vital steps in protecting your property rights and making informed decisions—but first, you need to know about the different types of liens you might come across. 

Are you also curious about UCC filings and how to find them? We discuss them in detail in this article.

Understanding Lien Records

There are five primary types of liens: real estate liens, bank liens, judgment liens, mechanic’s liens, and tax liens. 

Real estate liens

In this case, the property itself serves as collateral against a debt. These liens are typically for mortgages or home equity lines of credit (HELOCs). If you fail to pay your mortgage, the bank can foreclose on your home and sell it to repay the loan.

Bank liens

A bank lien is similar to a real estate lien in that they both serve as collateral for a loan. However, as in a real estate lien, a bank lien secures your deposit accounts instead of securing the property. If you default on your debt, your bank can use the money in your account to repay it.

Judgment liens

These types of liens are placed on your property by creditors after they win a lawsuit against you. The court orders the lien to enforce a judgment for debt payment. In this case, the creditor has won the right to claim your property if you don’t pay what you owe.

For businesses, this is one of the liens they’ll primarily be interested in finding out about when considering extending credit to customers or working with a person or business entity. If there’s a judgment lien, it means the customer has had legal action taken against them in the past for unpaid debt—something that can be considered a red flag.

Mechanic’s liens

As the name suggests, mechanic’s liens are placed on real estate by contractors, subcontractors, or suppliers who haven’t received payment for work or materials used on the property. These types of liens are common in construction and renovation projects.

Tax liens

The government places tax liens on your property when you fail to pay your taxes. It gives them a legal claim to your property, that is, until the tax debt is paid off. Federal, state, or local governments can impose these liens.

If you want to purchase a property, first do your due diligence and check for any existing tax liens. If there is one, paying off the debt could become your responsibility. Additionally, tax liens can hurt your credit score and make it tricky to get financing in the future.

Implications of Having a Lien

We’ve touched on some of the potential implications of liens, but let’s talk more about what they can mean for business owners when deciding whether to extend credit or work with a customer.

First and foremost, liens can be a sign that the person or business entity has had financial troubles. This could mean they have a history of not paying their debts on time or at all, which may make them a higher risk for defaulting on any new debt.

Not to mention, having a lien placed on your property can affect your credit score and make it harder to receive financing in the future. It also shows you may have had trouble managing your finances or paying your debts in the past. Naturally, this could be a red flag for potential business partners.

Another implication of having a lien on your property is how it restricts your ability to sell or refinance your property without first paying off the lien. It can also lead to additional legal fees and penalties if the lien is not resolved promptly.

How to Search for Lien Records

There are different ways to search for lien records, which can vary depending on the lien you’re searching for. 

  1. Online Resources and Databases: Many jurisdictions have online public records where you can search for lien information based on a property address or person’s name.
  2. County Clerk or Recorder’s Office: Visiting your local county clerk or recorder’s office provides access to hard copies or digital records of liens filed in the region.
  3. Title Search Companies: For comprehensive lien searches, consider outsourcing the task to professional title search companies that can provide detailed reports. 
  4. Credit Reports: While credit reports may not list all types of liens, they can include federal tax liens and judgments.

Working with CS Business Screen is the best, most comprehensive way to ensure you find everything you need before making a big decision. Our due diligence background checks make getting all the information you need to know to make confident choices easier. 

With our screening services, you can:

  • Verify businesses
  • Screen officers and owners
  • Identify criminal activity
  • Uncover financial matters, including liens
  • Spot reputation issues 

Liens: FAQs

Still have questions about liens? Here are some frequently asked questions and their answers:

Does a lien hurt your credit?

Yes, liens can negatively impact your credit score. It tells potential lenders that you may have difficulty paying back any debt. Depending on the type of lien, it could be on your record for anywhere between 90 days and 20 years.

Is a lien the same as a loan?

No, liens aren’t the same as loans. Liens are legal claims against an asset or property, while a loan is a borrowed sum of money a person must repay with interest.

How do I remove a lien?

To remove a lien, you must pay off the debt in full. Once paid, the lien holder should release the lien and provide documentation to show that it has been satisfied. You can then request to have the lien removed from your credit report. If there are any errors or discrepancies related to the lien, you may need to work with a lawyer to resolve them.

What does having a lien on your business mean?

If your business has a lien, someone else has a legal claim against your assets or property. This could be due to unpaid debts, taxes, or other financial obligations. The lien holder may have the right to seize your assets to fulfill the debt.

Uncover Liens With Our Help

Now that you understand more about liens and their impact, keeping your business free from them is crucial. With our screening services, you can identify any potential liens on your business or the businesses you work with. This will help protect your financial stability and reputation in the long run. Get pricing for our screening services today and learn more.

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