What You Need to Know About Unrecorded Liens
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When a property owner has a mortgage on their home, the mortgage company places a lien on the property. This type of recorded, voluntary lien will not affect any future sale of the property because the lien is be paid off during the closing process. Once the mortgage debt is paid, the clear title will transfer to the new owner.
Unfortunately, unrecorded, involuntary liens may not show up during a normal title search. An unrecorded lien may end up costing the new owner hundreds or even thousands of dollars. If an unrecorded lien still exists on the property, the responsibility to pay the lien will transfer to the new owners. This can cause a significant and unwanted financial liability.
The following are examples of unrecorded liens:
Unpaid charges from municipalities for nuisance abatement services, such as grass/weed cutting, pest control, or the boarding up of abandoned property;
Code violations, such as structural issues. Some fees can accrue daily for undetected ordinance violations;
Outstanding utility bills. Many delinquent utilities go unnoticed until a new homeowner starts a new service;
Unresolved fees for inspections, certificates, or building permits; and
Special assessments for property features, such as sidewalks, sewer hookups, and road paving.
Preventing the Complication of Unrecorded Liens
A recorded lien is any lien that is found in the public record. This includes mortgages, mechanic's liens, or tax liens. A title search performed by a title company or real estate law firm determines the vested owner, the liens, or other judgments on the property, the loans on the property, and the property taxes due.
An unrecorded lien is an involuntary debt placed against the property that will not be shown in the public record. Fines and fees can accrue daily, resulting in hundreds, if not thousands, attached to the property.
Unfortunately, there is no single place to search for all unrecorded liens. We advise that buyers do a title search that includes a municipal lien search to discover unrecorded liens or encumbrances on a property.
If you are purchasing a home with a lender, the lender requires a title search. If you are purchasing a home without a lender, you must have a title search completed to obtain title insurance. Contact Homestead Title to handle your closing and we will take care of the title search as part of the closing process.
The title is then examined by one of our attorneys. During this process, this will confirm the title's chain and that the property is free from defects. Additionally, obtaining title insurance means that should any liens be missed, you'll be covered. Please note, if conduct your own title search you cannot obtain title insurance. You may end up losing your home, your down payment, and any other mortgage payments you've made without any legal recourse to get anything back.
Hiring a Professional Title Examiner
We recommend hiring a title agent or real estate attorney to conduct a final property search to confirm the title's chain and that the property is free from defects. Additionally, obtaining title insurance means that should any liens be missed, you'll be covered. Please note, if conduct your own title search and miss an unrecorded lien, you may end up losing your house, your down payment, and any other mortgage payments you've made without any legal recourse to get anything back.
Homestead Title is a full-service title and escrow company. Since 1934, we have provided our customers with competent, thorough, and professional service. Prior to each closing, we search public records to clarify legal and financial risk for lenders, realtors, and other stakeholders in the real estate transaction process. Our energetic and capable team of real estate title professionals provide accurate investigations, rapid turnaround time, streamlined paperless delivery, and exceptional customer service. For more information, call us at (504) 581-6427 and let us provide you with a smooth and efficient real estate closing.