House Sold With a Lien: Can I Sue?

A lien on a property can create significant problems. Because of the scale of personal investment involved, issues regarding the financial aspect of homeownership can be unnerving. This is especially true for any potential restrictive liens.

Discovering a lien on your property can be devastating. It is essential to understand liens, how they work, and your options to resolve any issues that arise.

This article outlines your legal options if you unknowingly buy a real estate property with a lien. You can also consult a real estate attorney for legal advice specific to your situation. An attorney can investigate whether the lien should have been discovered during the title search. They can also determine if you have grounds to sue the title company or seller for failing to disclose it.

What Happens if If I Buy a House With a Lien on It?

Generally, a title search will determine whether a property has a lien on it. It is uncommon for people to purchase property with a lien on it because property usually cannot be sold until any liens are satisfied. But liens in the name of previous owners can sometimes go unnoticed in a deed.

These situations become complicated quickly, and navigating this type of legal territory alone can be challenging. If you are having issues with liens on your property, a real estate attorney in your area can help. 

What Is a Lien?

A lien is a legal right to property to secure a debt. A creditor is someone who has not been paid and may want to collect money from the debtor by claiming a share of something of value that the debtor owns. If someone is unable to pay their debts, that claim on the debtor’s property may become a lien. If a lien is placed on the property, the creditor may get reimbursed if the property is sold.

Liens can be placed on all kinds of property. But they are usually placed on the most valuable items a debtor owns, like real estate, vehicles, or boats. This is because this type of property will usually cover or significantly contribute to the amount owed.

What Does a Lien Do?

Once filed, a lien limits the property owner’s ability to transfer ownership of the property’s title. The lien must be satisfied before the lien property is sold.

There are different types of liens. Some of the common types of liens include:

• Judgment lien
• Mechanic’s lien
• Involuntary lien
• General lien

Who Can Put a Lien on Your House?

Just as there are many types of liens, there are many types of people and institutions that can put a lien on your property. To understand who can put a lien on your property, you should be aware of both voluntary and involuntary liens.

Here are a few examples of who might place a lien:

• Mortgage lenders: If you have taken out a mortgage, the creditor may have put a lien on your house as collateral. This mortgage lien is a voluntary lien into which the debtor has knowingly entered.
• Construction companies: If you have failed to pay for work you have had done on your property, the contractor you hired could put an involuntary lien on your property to pay for their labor and materials.
• Government entities: If you have not paid taxes, the government may put an involuntary tax lien on your property to cover those unpaid taxes.
• Homeowners associations (HOAs): Unpaid HOA dues and fees may escalate to an involuntary lien.
• Prevailing parties in lawsuits: If someone won a formal judgment in court against the previous homeowner, a judgment lien can help them collect from the losing party.

Can Someone Take My House Because of the Undisclosed Lien?

If the debt connected to the lien remains unpaid, it is possible for a creditor to seize the home through legal means. For example, the creditor may take steps to begin the foreclosure process.

This is why new homeowners should take lien notices seriously, even if the lien wasn’t disclosed during the house sale. To avoid a forced sale, the new homeowner may need to pay the debt themselves. Title insurance may cover the related costs of undisclosed liens as included in the owner’s policy.

Even if the lien holder doesn’t force a sale, the lien can make it difficult to refinance or sell the house in the future.

Why Isn’t the Lien the Seller’s Responsibility?

A lien is attached to property rather than the individual debtor. That means when you buy a home, you are buying everything that comes with the property, including encumberances like existing liens. Legally, the lien would still exist on the property.

Yet, sellers can’t intentionally conceal a lien to pass it off to unsuspecting buyers without consequences. Buyers may hold sellers who fail to disclose known liens responsible for deceiving them during the home purchase process.

Verifying an Undisclosed Lien

If someone claims to have a lien on your property, the first step is to check whether their claim is legitimate. Most of the time, any lien should appear in the title search, though a legitimate lien may still exist.

Before responding or providing more information, consult an attorney about the validity of their claim. Getting another title search may be a good idea. You’ll want to verify that the person claiming the lien isn’t trying to scam you.

It’s also possible that the person or entity genuinely believes a lien still exists due to a paperwork error. They may be seeing an outdated or incorrectly filed lien. Clearing up the documentation issue may be enough to solve the problem.

If you discover that the lien isn’t valid, the other person wouldn’t have legal grounds to act on their claim. Further legal action may not be necessary. But if the claim is indeed real, it’s time to discuss the potential next steps with your lawyer.

Concerned About a Lien? Get Legal Advice

Finding out there is a lien on your property after purchase can be unnerving at best. But you have legal options.

You may have legal grounds to sue, especially if the lien should have been uncovered during the title search or was not disclosed by the seller. A real estate attorney in your area can help protect your rights and financial investment.

A skilled lawyer can:

• Review your purchase documents
• Investigate who is responsible
• Help you pursue compensation from the seller, title company, or other liable parties
• Assist with the insurance claim process