Voluntary vs Involuntary Liens

A real estate lien involves a legal claim on assets. Filed with a county records office or state agency, the lien allows the holder to obtain access to the property if the debts aren’t paid. Liens help creditors collect money owed to them by “clouding” the title of a property. Typically, a property can’t be sold without liens being satisfied.

There are voluntary and involuntary liens. What’s the difference between the two?

A voluntary lien is one a person voluntarily takes out with the terms stated in a contract (or the mortgage deed of trust and the note). Generally, when people talk about voluntary liens they’re talking about mortgages. A borrower gets money from a lender in a mortgage situation– and the lender gets a “note” and a “lien on the house” which serves as collateral for the debt. If the borrower can’t pay the money back properly, then the lender, typically, assumes ownership of the house– in “foreclosure.”

What are involuntary liens, then? These are liens placed on a property by others (besides mortgage lenders) for unpaid obligations. When people talk about involuntary liens, they’re usually referring to the most common type: tax liens. How about an example? If you own a house and don’t pay your property taxes for several years, the local county can place a lien on your property, which is their way of telling you, “Pay up!” If you don’t pay up, they can proceed with foreclosure. Others who might place involuntary liens on a property include homeowner associations (HOAs), contractors, the IRS, and/or “the bank.” Liens can be placed when a property owner fails to pay utility bills, HOA dues, and even child support payments.

If and when you’re looking to buy a property, you should have a lien search done to find out if there are any liens placed, and for what amount owed, too. Lien searches are typically conducted at the county assessor’s office or through a company like ours, Reliable Lien Search. Call us today at 954-447-6947 with any questions you might have; we’re here to help you navigate the process and provide you with answers.