When buying or selling a home, proof of ownership, or the property title, and issues affecting it, are critical. If you have a cloud or lien on your title, this means somebody or some business entity has laid claim to a portion of the equity in your home. There are different types of liens that affect the marketability of your home.
For this article, I interviewed Chris Swynford, an attorney in Williamsburg, Virginia, whom I utilize frequently for real estate transactions. Mr. Swynford commented on several types of property liens that are common issues for homebuyers and home sellers.
Property Title Insurance – for Matters NOT of Record
In order to understand the different types of liens, it is necessary to review the concept of the actual deed or title. A property title can be insured by a title company, and I always recommend my clients purchase owner's title insurance coverage, even though not required by commercial lenders (which ALWAYS require lender's carry title insurance). “Generally, many matters NOT of public record (including mechanics' and materialmens' liens for new construction) are covered under title insurance, including issues such as misrepresentation of marital status, forgery or fraud in executing documents, missing heirs, or unknown boundary contests,” said Mr. Swynford.

Matters of Record for Property Title
According to Mr. Swynford, “state law where the property is located covers most matters of title. East of the Mississippi, excluding Louisiana, property is generally held in one of several ways: tenancy by entirety, title passing to the survivor upon death of the first party, and that exists only between husband and wife; and can be reached (lien) only by the creditors of both; joint tenancy with right of survivorship, title passing to the survivor upon death; but which may be severed by the creditor of only one party in judicial proceedings; and, tenancy in common. Upon death of one co-tenant the undivided interest of the deceased passes by will or to heirs under state laws of interstate succession.”

Chris Swynford described various liens not commonly known:

Voluntary Liens
Most people are aware of voluntary liens placed on their property. These include mortgages or deeds of trust executed by the owner/borrower.

Involuntary Liens
As the term suggests, involuntary liens are placed on property by other than the legal owner of the property. Common involuntary liens are placed on property to cover real estate taxes; judgments; homeowner's association/condominium liens for unpaid dues/assessments; and mechanics liens for labor and materials provided to build/improve property.

Municipal Liens
As the term implies, the local municipality may place a lien on property. Perhaps the owner did not pay trash removal or grass cutting fees. Or, the municipality had to remove inoperable motor vehicles from the property, or remove a structure endangering public health; or, for community improvement, e. g. to pay for a park adjacent to a property, new sidewalks, gutters, alleys, water and sewer lines.

Lis Pendens
This provides notice that a suit against the title is pending. A Lis Pendens may indicate a breach of contract, or an heir who claims ownership of the property; or, a person who claims ownership of property through adverse possession. It has to be cleared for property sale or purchase to proceed

Estate Tax Liens
Some states may have an estate tax, though many do not. Estate taxes liens do not have to be recorded in order to be valid. If the estate of a deceased individual is subject to federal or state estate taxes, the proceeds of sale are held for one year from the date of the property owner's death. If the proceeds are not held for one year, a bond may be posted to cover any tax due.

It is always advisable to seek legal advice in closing a real estate transaction, often involving legal and significant economic considerations.



About the Author

Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg, Virginia, and she manages investment property. Elaine is also an Accredited Buyer's Representative as well as a Senior Real Estate Specialist. She has helped numerous clients invest in and make money on property in Southeastern Virginia.