Understanding Lien in Real Estate
Buying or selling a home should feel exciting, not stressful. But there’s one hidden issue that can suddenly delay a closing, interrupt financing, or stop a sale altogether:
A lien.
Even if the home looks perfect on the outside, a lien can create legal and financial problems if it isn’t handled correctly. Whether you are a first-time buyer, a lakefront seller, or someone purchasing a vacation home near Lake Minnetonka, it’s important to understand what liens are, how they work, and how to avoid surprises during closing.
This guide explains everything in clear, simple language, so you know what to look for and what to do if a lien appears during a transaction.
What Is a Lien in Real Estate?
A lien is a legal claim placed against a property because the owner owes money. It gives a creditor (someone who is owed) the right to collect payment when the property is sold or refinanced.
In other words:
- A lien follows the property, not the owner
- A property cannot legally transfer to a new buyer until the lien is paid or released
- Liens appear on the property title and show up during a title search
The purpose of a lien:
To guarantee that a debt or obligation gets paid.
Liens are common, and most are easy to resolve once identified. Problems arise when a lien is discovered late in the process, especially days before closing.
Who Can Place a Lien on a Property?
Liens can be filed by:
- Mortgage lenders
- Government agencies (property tax or IRS)
- Contractors or builders
- Homeowners associations (HOAs)
- Courts (judgment liens)
- Utility companies in rare cases
Mortgage Liens vs. Other Liens
Many homeowners don’t realize this, but almost every mortgaged property already has a lien, the mortgage lender holds one until the loan is paid off.
This is normal and expected.
The problems usually come from unexpected or unpaid liens, such as:
Common Types of Liens (With Plain-Language Examples)
1. Mortgage Lien
- Lender holds a lien until you fully pay off the loan.
- When the mortgage is paid, it’s released.
Example: You sell your home for $700,000, and still owe $200,000. The mortgage gets paid first at closing, and the remaining balance becomes your proceeds.
2. Property Tax Lien
- Happens if property taxes are overdue
- County or state can take legal action if ignored
- Must be paid before the home transfers
These are very common and usually resolved quickly with a payoff request at closing.
3. Mechanic’s / Contractor Lien
Filed by contractors, builders, roofers, or remodelers when a homeowner doesn’t pay for completed work.
Example:
Someone renovates their kitchen or installs a new dock on a Lake Minnetonka property, but never pays the final bill. The contractor places a lien, and it shows up when the home goes under contract.
4. HOA Lien
If a homeowner falls behind on association dues or special assessments, the HOA can legally place a lien.
5. Federal or State Tax Liens
Filed for unpaid income taxes.
Can stop a sale until resolved or settled.
6. Judgment Liens
Comes from court cases, credit card debt, lawsuits, medical bills, child support, etc.
These can be more complicated to remove because they involve attorneys and court paperwork.
Voluntary vs. Involuntary Liens
- Voluntary: Mortgage liens, agreed to by the homeowner
- Involuntary: Tax, judgment, contractor liens, imposed without consent
General vs. Specific Liens
- General lien: Applies to all property a person owns
- Specific lien: Only attached to a particular property or asset (most real estate liens)
How Does a Lien Work in a Real Estate Transaction?
Here’s the simple version:
- A creditor files a lien with the county
- The lien is recorded on the property title
- When the owner tries to sell or refinance, a title search reveals the lien
- The owner must pay or settle the lien
- Once paid, a lien release is filed
- Title becomes clear, and closing can move forward
If the lien isn’t cleared
The home cannot legally transfer to a new buyer
This is why experienced agents always recommend a title search early in the selling process.
Do Liens Affect Your Credit Score?
It depends on the type of lien:
| Type of Lien | On Credit Report? | Affects Credit Score? |
| Mortgage lien | No | No |
| Property tax lien | Sometimes | Can if it goes to collections |
| IRS tax lien | Yes | Yes |
| Judgment lien | Yes | Yes |
| Mechanic’s lien | Sometimes | Usually not, unless legal action follows |
Even if a lien does not show up on a credit report, it can still block a closing.
How to Check If a Property Has a Lien
You can check:
- Through a title company
- County Recorder / Registrar of Deeds
- Local tax office
- HOA or association
- Public court records
Most buyers do not check these themselves, title companies handle it during the purchase process.
Can You Buy a House With a Lien On It?
Yes, but only after the lien is settled.
The buyer is protected when the purchase agreement requires the seller to convey clear title. At closing, the lien is paid from the seller’s proceeds or negotiated separately.
What Happens If a Lien Is Not Paid?
- Delays closing
- Buyer financing can be denied
- Seller may lose a buyer
- Attorney involvement increases cost
- For tax liens, the government can seize or auction the property
Ignoring a lien never makes it go away. It only grows with interest and penalties.
How to Remove or Resolve a Lien
There are several options depending on the type of debt:
- Pay the outstanding balance
- Negotiate a settlement with the creditor
- Dispute if the lien was filed incorrectly
- Use refinance funds to pay off debt
- Provide lien release form at closing
- Work with a real estate attorney if it involves a court judgment
Once paid, the creditor files a Lien Release with the county, and the title becomes clear.
Are Liens Common in Minnesota Real Estate?
Yes, especially in areas with remodeling, older homes, lake properties, or HOA communities.
Common in the Lake Minnetonka area:
- Dock construction or shoreline work
- Luxury home renovations
- Vacation home contractors
- HOA assessments
- Estate sales or inherited properties
These are very normal, and experienced agents deal with them regularly.
Tips for Minnesota Home Sellers
- Order a title search before listing
- Â Confirm no unpaid HOA dues
- Keep contractor receipts and invoices
- If selling an inherited home, check court records early
- Disclose problems up front, buyers appreciate honesty
Tips for Minnesota Home Buyers
- Always use a title company
- Ask about dock permits, HOA dues, and assessments
- If the seller recently remodeled, ask for proof of payment
- Make sure the title is clear before closing
- Work with a local realtor familiar with lakefront regulations
FAQs About Liens
Q: Is a lien a bad thing?
Not necessarily. Mortgage liens are normal. Only unpaid or unexpected liens create problems.
Q: Can a lien prevent me from selling my home?
Yes. The title must be clear before it legally transfers.
Q: Can a buyer take over the lien?
In rare cases, yes, if the buyer agrees to assume the debt. Most buyers will not.
Q: How long does a lien stay on a property?
Until the debt is paid. Some judgment liens can last 10–20 years if not resolved.
Q: Should I panic if a lien is found during closing?
No. Most liens are resolved quickly. The key is working with the right professionals.
Final Thoughts
Liens sound scary, but they’re simply part of real estate law. Most are easy to resolve once identified, as long as the right team is involved.
The real trouble happens when a lien is discovered too late.
Need Help With a Lien Before Buying or Selling Near Lake Minnetonka or Excelsior?
If you want a smooth, stress-free closing, expert guidance matters. Our team:
- Helps sellers clear title before listing
- Works with buyers, lenders, and title companies
- Assists with lien payoffs and lien releases
- Ensures you close without delays or surprises