Finding out that there is a lien on your property can be alarming, especially if you're preparing to sell your home. You may immediately wonder: Can you sell a house with a lien on it, or will the lien prevent the sale altogether? In North Carolina, having a lien does not necessarily mean you cannot sell the property. However, the type of lien, the amount owed, and the steps required to resolve it can affect the sale.
Before putting a property on the market, it's important to understand what the lien means and how it could affect your ability to transfer clear title to a buyer.
What Is a Lien on a House?
A lien is a legal claim or interest in property that can secure payment of a debt or obligation. In simple terms, a lien can give a creditor or other lienholder certain rights involving the property if an obligation isn't satisfied.
There are several different types of liens that can affect real estate in North Carolina.
Some common examples include:
- Mortgage Liens
- Tax Liens
- Judgment Liens
- Mechanics' Liens
- Other Statutory Liens
The rules surrounding these liens aren't identical. That's why finding out what kind of lien has been placed on a property is one of the first steps toward figuring out what happens next.
Can You Sell a House With a Lien?
So, can you sell a house with a lien in North Carolina? In many circumstances, yes. The presence of a lien doesn't necessarily prevent a property from being sold. However, the lien generally needs to be addressed as part of the transaction.
For example, if money is owed to a lienholder, the lien may be paid from the proceeds of the sale. This is one reason title work is so important when selling real estate.
A buyer generally wants to receive the property without unexpected claims against it, and the closing process is designed to identify and address issues affecting title.
What Happens When a Lien Is Discovered Before Closing?
If a title search reveals a lien, the first step is figuring out exactly what it is.
The closing attorney or other professionals involved in the transaction may need to determine:
- Who Filed The Lien
- Why The Lien Was Filed
- How Much Is Owed
- Whether The Lien Is Still Valid
- Whether The Amount Is Disputed
- What Is Required To Release The Lien
Once the situation is understood, the parties can determine how to address it. Sometimes the solution is relatively straightforward. In other situations, resolving the lien can take additional time, particularly if there is a disagreement about whether the lien is valid or how much is owed.
Can a Lien Be Paid From the Sale Proceeds?
Often, yes. If the property is being sold for enough money to cover the amount owed, the lien may be satisfied from the seller's proceeds at closing.
For example, imagine that you owe $15,000 on a valid judgment lien and are selling your home for $350,000. The lien doesn't necessarily mean you have to pay the entire $15,000 months before selling the house. Depending on the circumstances, it may be possible to satisfy the lien from the proceeds of the transaction.
The exact process depends on the type of lien and the requirements of the lienholder.
What If There Isn't Enough Money From the Sale?
This is where things can become more complicated. Suppose you owe $50,000 on a lien, but after paying the mortgage and other costs associated with the sale, there isn't enough equity to satisfy the lien. The lienholder may not simply agree to release the lien for less money.
The parties may need to negotiate a resolution, determine whether another source of funds is available, or explore other legal options. A seller shouldn't assume that a planned sale automatically eliminates the debt.
What Is a Judgment Lien?
A judgment lien can arise when a money judgment is docketed in accordance with North Carolina law.
North Carolina law provides that a properly docketed judgment can become a lien on real property owned by the judgment debtor in the county where the judgment is docketed. The statute generally provides for 10 years from the entry of the judgment, subject to certain exceptions.
This can create a problem for someone who is ready to sell a house but discovers an old judgment attached to the property.
The first question isn't necessarily "How do I pay it?"
It may be:
"Is this lien still valid, and is it actually attached to this property?"
That is something that should be investigated before assuming the debt must be paid.
What About a Tax Lien?
Unpaid property taxes can create liens against real property. North Carolina law provides specific procedures for enforcing tax liens, including circumstances in which real property can ultimately be sold to satisfy delinquent taxes.
If you're selling a home with unpaid property taxes, those amounts need to be addressed during the transaction.
North Carolina law also provides that, in certain judicial sales and sales conducted under a power of sale, taxes constituting a lien on the property are addressed from the sale proceeds unless the property is specifically sold subject to those liens.
Because tax liens can have significant consequences, don't ignore a notice involving unpaid property taxes.
What Is a Mechanics' Lien?
A mechanics' lien is another type of lien that can affect real property.
North Carolina law provides statutory lien rights for certain contractors, subcontractors, laborers, and material suppliers involved in improving real property. The law establishes specific requirements and deadlines for perfecting and enforcing these claims.
For example, a property owner might discover a lien after having work performed on a home if a contractor, subcontractor, or supplier claims they were not properly paid.
These situations can become particularly complicated when the homeowner believes the contractor has already been paid or disputes the amount being claimed.
Can a Lien Prevent You From Selling Your House?
A lien can complicate a sale, but that doesn't necessarily mean the property cannot be sold. The biggest concern is often whether the buyer can receive the title they're expecting. If a valid lien remains attached to the property, the parties may need to resolve it before or as part of closing.
That could involve:
- Paying The Lien
- Obtaining A Lien Release
- Correcting An Improperly Filed Lien
- Negotiating With The Lienholder
- Resolving A Dispute
- Obtaining Appropriate Court Relief
The appropriate solution depends on the circumstances.
What If You Believe the Lien Is Wrong?
Don't automatically pay a lien simply because it appears in a title search. There may be situations in which the debt has already been paid, the lien was improperly filed, the amount is incorrect, or the lien is no longer enforceable.
For example, North Carolina law has specific requirements governing mechanics' liens, including deadlines for filing and enforcing certain claims. If you believe a lien is invalid, an attorney can review the underlying documents and determine what options may be available.
Trying to resolve a disputed lien on your own can delay a real estate transaction or result in unnecessary expense.
How Do You Find Out If There Is a Lien on Your House?
A title search is one of the most important tools for identifying claims that may affect real estate. A title examination can uncover recorded documents and other issues that need to be addressed before ownership is transferred.
This is one reason sellers should work with the appropriate real estate professionals early in the process rather than waiting until the day before closing to discover a problem.
If you're thinking about selling and you're concerned there may be a lien on your property, finding out sooner rather than later can give you more time to resolve the issue.
What Should You Do If You Discover a Lien Before Selling?
If you discover a lien, don't panic. Start by finding out exactly what you're dealing with.
Ask:
- What Type Of Lien Is It?
- Who Is The Lienholder?
- How Much Is Owed?
- When Was The Lien Filed Or Docketed?
- Is The Lien Still Valid?
- Can It Be Satisfied From The Sale Proceeds?
- Is The Amount Being Disputed?
Once you have those answers, you'll have a much clearer picture of how the lien could affect your sale.
Can an Attorney Help Remove a Lien?
Yes. If you're trying to sell a house with a lien, an attorney can help determine what the lien is, whether it appears to be valid, and what steps may be available to resolve it.
Depending on the circumstances, that might involve working with the lienholder, reviewing payment records, negotiating a resolution, preparing appropriate documentation, or pursuing legal action when necessary.
The sooner you identify a lien, the more time you have to address it before closing.
Don't Let a Property Lien Surprise You at Closing
Discovering a lien when you're already trying to sell your home can create unnecessary stress and potentially delay the transaction.
If you're wondering whether you can sell a house with a lien, the answer depends on the type of lien and the circumstances surrounding it. A lien doesn't automatically mean a sale is impossible, but it does mean the issue should be addressed.
Eldreth Law Firm helps North Carolina clients with real estate matters, estate issues, and disputes involving property. If you've discovered a lien and aren't sure what it means for your property or an upcoming sale, an attorney can help you understand your options.
Learn more about Eldreth Law Firm and its legal services
Getting ahead of a lien before you reach the closing table can make the process much easier. If you know there may be an issue with your property's title, it's better to investigate it early than discover it when a buyer is already waiting to close.
