A lien is a legal claim against property that can be used as collateral to repay a debt. In other words, it is a legal tool used by those who are owed money to ensure that they are paid back. Unfortunately, liens can be attached to likely the most expensive thing you own- your home. In North Carolina, a judgment automatically attaches to any real property owned by the judgment debtor in the county in which the judgment is entered.
For example, if you have a judgment against you and you owe a lien holder $10,000 but don’t have $10,000 in cash, a lien holder is entitled to $10,000 from the proceeds of the sale of your home. This article will discuss some important liens that are involved in real estate transactions, and what your real estate attorney will do at closing to make sure that those liens are paid-off.
Mortgage- A mortgage is a lien because the home you are purchasing with the mortgage is acting as the collateral in the event you default on your mortgage. If you are selling your home and you still owe money on your mortgage, the closing real estate attorney will pay-off that balance from the proceeds of the sale.
Judgment lien- If you have a court judgment against you, you might have a judgment lien. A judgment lien is created automatically on any property owned by a judgment debtor in the county where the judgment is entered. If the property is located in a different county, the creditor must file the judgment in the county where the property is located. This type of lien will remain attached to a judgment debtor’s property for 10 years, even if the property changes hands.
Mechanic’s lien- If a contractor, subcontractor, or supplier works on your home and you don’t pay them, they can file a mechanic’s lien on your property. In North Carolina, an action to enforce a mechanics lien against a property must be initiated within 180 days after the date of last furnishing labor or materials to the project. As a part of the closing process for residential homes, all sellers are required to sign a lien affidavit form. This is an affidavit and indemnity agreement where the owner acknowledges that there have been no recent improvements within the last 120 before closing.
Income and Property Tax liens- The local, state, and federal governments can put a lien on your property if you owe them money. If you don’t pay your income taxes, the IRS can put a federal tax lien on your property. These are legislated by federal law and take priority over North Carolina state law. If you do not pay your county and city (if applicable) taxes and you are seeking to sell your property, then all delinquent taxes must be paid-off at closing.
If you do have a judgment against you and there is a lien on your property that is not paid off at closing, the next person who buys the property is now subject to that lien. That is why it is very important that all liens are paid-off on, or before, the closing date. If you are aware of any liens on a property that is being sold, please inform the closing real estate attorney as soon as possible.
Please call us at 828-505-8514 or email us at email@example.com for assistance on your real estate closings that involve liens.