When purchasing a property, understanding the potential obstacles is important. While recorded liens, such as mortgages or tax liens, are typically discovered during a title search, unrecorded liens can pose major risks. Unrecorded liens, not listed in public records, can still impact property ownership and value.
Read on to learn about the types of unrecorded liens you should be aware of.
Government Liens
Government liens from federal, state, or local agencies can pack a major punch. The IRS has the serious power to place tax liens on properties for outstanding income tax debts, unpaid payroll taxes, and other delinquent payments.
Even at the local level, municipal utility companies can pursue liens for overdue electric, water, sewer, or trash bills left unpaid by previous owners. Liens can also come from zoning violations, code enforcement fines, parking tickets, and other municipal debts.
These government liens give agencies the legal right to recoup money owed to them from the home’s value, even if those debts accrued under the watch of a prior owner. No property transfer erases those lingering claims, unfortunately.
HOA Liens
For homes located within a neighborhood or community with a homeowners association (HOA), grappling with HOA liens is a real risk if prior owners have not paid regular fees and dues.
Most HOAs can place a lien on a property if the owner falls seriously behind on paying mandatory charges for maintenance, security, insurance, and amenities. HOA liens often have super-priority status, meaning they get paid out first if the home is foreclosed or sold, impacting the home’s value until resolved.
Judgment Liens
These liens stem from legal judgments awarded to someone who won a lawsuit over unpaid debts, breach of contract claims, or other civil cases. The court ruling essentially treats the home itself as collateral to enforce repayment.
So, if the previous homeowner lost a major civil judgment but never paid up, creditors can seek to collect by placing that judgment lien against the property’s value. This creates a legal hurdle for new owners trying to sell or refinance until that debt is cleared.
Mechanic’s Liens
Contractors such as roofers, builders, electricians, plumbers, and other tradespeople can file mechanic’s liens (also called construction liens) on properties if their final bills for labor and materials go unpaid.
After completing work and not receiving the negotiated payment from the homeowner, contractors can place this lien to recover costs directly from the home’s value. It acts as collateral on the debt they’re still owed. New owners often inherit mechanic’s liens left behind by sellers who skipped paying contractors.
Child Support Liens
When parents fall far behind on court-ordered child support obligations, judicial systems have the power to impose liens on real estate properties to collect the debts forcibly.
In extreme cases of delinquent child support, a lien can be placed on an offending parent’s home by the custodial parent, the state child support enforcement agency, or even the federal government. The outstanding balance then gets treated as a debt attached to the home.
New owners could be responsible for paying off those back child support debts through the value of the house until the lien is properly resolved or satisfied.
Don’t let unrecorded liens catch you off guard. Trust our team at Florida Lien Search to provide thorough lien searches and valuable insights into potential risks. Contact us today!