Most Common Title Defects: Undiscovered or Undisclosed Liens

By Marc Shaw

In our effort to educate consumers about the importance of obtaining a title insurance policy during any real estate transaction, the team at World Wide Land Transfer is continuing our blog series about the most common title defects that can cost homeowners time and money. Today, we will be discussing undiscovered or undisclosed liens, an encumbrance that can slow a real estate transaction or halt the deal entirely.

What Is a Lien?

A lien is a legal claim against a property that can be used as collateral for the repayment of debt. If the debt is not repaid, the property can be seized and sold to repay it. Many types of liens can be taken out against property, including:

• Judgment Liens – this is a lien placed by the courts, usually as the result of a lawsuit. If the owner does not follow the terms of the judgment, the property can be seized.
• Mechanic’s Liens – a contractor will often use this type of lien to ensure they are paid for work performed on a property.
• Real Estate Liens – these are often put in place during the mortgage process to ensure the buyer pays back the lender. When the mortgage is paid off, the lien is released.
• Tax Liens – tax authorities are authorized to place liens against a property to ensure the payment of tax debts.

These are just a few of the most common lien types, but others may exist. That’s why it’s so important to work with a title insurance company and do thorough research before closing any real estate transaction.

Undisclosed and Undiscovered Liens

When you are purchasing a property, the title insurance company will conduct a thorough public records search, and you may also choose to work with an attorney to dig deeper and discover liens that are not part of the public record, or that the owner has not disclosed. If you buy a property with a lien against it, that lien becomes your responsibility. For example, if a previous owner failed to pay property taxes, a lien could be attached to the home that will need to be resolved before the sale can go through.

Without title insurance, you will be responsible for resolving this lien on your own. On the other hand, if you purchased title insurance before closing, your policy will generally cover the lien and any legal costs associated with resolving it. Some liens, like mechanic’s liens, could require a significant amount of money to be resolved. Others may require you to hire a lawyer and spend time in court. Either way, these unexpected costs are unwelcome to any home buyer.

If you want to avoid the difficulties that can come from an undisclosed or undiscovered lien, the best thing to do is purchase a title insurance policy before closing on a real estate transaction. As a Pennsylvania title insurance company since 2003, World Wide Land Transfer will be happy to answer any questions you have about title insurance and help you find the right coverage for your situation.

World Wide Land Transfer is a service-oriented PA title company with offices in Philadelphia, New York, and Washington, D.C. With a record of going above and beyond, we are trusted to close everything from complex commercial transactions to residential refinance and purchase transactions.