Historically, finding out if a lien has been placed on the property has been tricky. But now, with changes in technology, running a property lien search and performing due-diligence is easier than ever.
Below, we’ll walk you through everything you need to know about liens and show you the 4 quick steps you can take to find out if a lien is on a commercial property.
What is a Property Lien?
As a property buyer, it’s important to understand the meaning of property liens in-full to ensure that you’re making the smartest investment decisions.
To start, a property lien provides security for creditors in case their debtors fail to make necessary payments.
A lien is a legal claim put on a residential or commercial property that gives the holder the right to obtain access to that asset if the debtor’s obligatory dues are not paid or met in the contractually agreed-upon manner.
Types of Property Liens
In the real estate industry, debtors can owe payment to building service companies, lenders, or the government, so the process of how a lien plays out can vary quite a bit.
We’re going to look at both voluntary and involuntary commercial liens, as well as how those liens can be applied to a property.
Also known as, “consensual” liens, voluntary liens are ones that debtors choose to take on. They can be placed on residential or commercial properties.
A common residential or commercial mortgage is the best example of a voluntary lien. Here, a debtor chooses to accept funds from a lender to purchase a property. Terms are put in place for repayment, and the lender receives a lien on that property as a security.
If the debtor fails to repay the loan, the property can be seized or foreclosed on by the lender thanks to the lien that was originally placed on the asset.
Voluntary liens are very common in the world of both residential and commercial real estate, and are not a sign of distress. They’re not an immediate sign of opportunity for investors looking to buy.
Also referred to as, “statutory” liens, involuntary liens are the more frightening side of the equation.
Voluntary liens are more of a preliminary measure, requiring both the crediting and borrowing party to agree to terms. On the other hand, involuntary liens are issued by creditors without the consent of the debtor.
Two examples of involuntary liens include tax liens and mechanic’s liens.
A tax lien arises when a property owner neglects to pay property taxes for an extensive period of time, for which the government would put in a claim for that asset.
Involuntary liens are a clear sign of distress, but can raise either red or green flags for potential buyers (more on that later).
Lien on Real Property
The way that liens are applied to properties can vary a bit, too. Typically, commercial liens are applied to real property. Which means, as a security, the property asset itself is what’s at stake for the debtor.
A lien on real property can be applied to newly acquired property (i.e. through a mortgage lien), or to previously owned property (i.e. through refinancing or additional mortgages).
Mortgages and tax liens serve as good examples of those put on real property.
Lien on Property Sale Proceeds
The other way for creditors to earn repayment is through the sale of a property.
In certain instances, the obligee can place a lien on a commercial property to then gain a secured interest in the property’s sale proceeds. If the owner decides to sell, the obligee receives a portion of the net proceeds to make up for unsatisfied debt.
Mechanic’s liens are a great example of one that would be applied to sale proceeds.
What do commercial liens mean for investors?
As an investor, it’s important to stay informed on property liens to assure that you understand what liens might be placed on your own property to better calculate your potential income.
Additionally, liens can signal whether a property is or isn’t likely to sell in the near future.
Mechanic’s liens can actually hold up or prevent the sale of a property, making them a red flag for investors. Tax liens, however, can be directly invested in, for example, signaling an immediate opportunity for an investor.
Investing in liens can be a seriously lucrative venture, but takes ample research and the right resources to discover properties at the right time.
Keep reading to learn how to run a property lien search quickly and effectively.
4 Quick Steps to Run a Property Lien Search
With the help of commercial real estate software and other tools like your local county clerk, a residential or commercial property lien search can be done in no-time.
Let’s run through four quick steps…
1. Identify Properties with Reonomy
As an investor, whatever your property preferences may be, they can be found by searching off-market.
Reonomy, the market’s leading provider of property intelligence, allows you to search and analyze any property larger than a single-family home across the country.
You can run a property search using any combination of the following filters as a basis:
- Property Location Filters
- Asset Type Filters
- Building and Lot Characteristic Filters
- Sales History Filters
- Debt History Filters
- Ownership Filters
- Tax Filters
Run a property search for your desired asset type, in your desired market, while also adding any sales and debt filters that might apply to what you’re looking for.
Once you have searched and identified properties that you would like to run a lien search on, you can begin gathering the ownership details on that property.
2. Get Ownership Details
With Reonomy, you can either search for a known property by address, or you can access the owner details of properties you’ve uncovered by tailoring your search.
For example, Perhaps you’ve run an off-market search for multi-family homes in Los Angeles, CA.
Once you identify even a single property of interest, you can quickly visit the profile page of that property to see the recorded owner, the individuals associated with the owning entity, and owner contact details.
You can pierce the LLC to find true owner names of any commercial asset. Those names can then be used to search for liens via public property records.
3. Search Public Lien Records Online
Once you have the name of a property owner, you can remain at your computer and first search your local public property records online.
While online search portals vary from market to market, many property records search tools let you search by property owner to find and view the filings associated with that property.
Take Miami-Dade County, for example—a county that has an easy-to-use records search platform.
By visiting the Miami-Dade County Recorder’s Official Record Search, you can simply enter the name of the owner you want to find lien information on, then select “LIEN – LIE” in the Document Type drop-down box.
Most of the time (as is the case for Miami-Dade County), upon running your search, you’ll be given a list of results for which you can click to see the document filed for the property lien.
Running your lien search entirely online is ideal, and is obviously a much easier, quicker process overall. Some websites will even directly show you local property lien sales, or let you view and join auctions for foreclosed properties.
You may not always be so lucky as to find property lien records online, however. In that case, you can simply reach out to your local county clerk’s office by phone.
4. Contact/Visit the County Clerk’s Office
While it may take a few extra minutes compared to searching online, reaching out directly to your local county recorder’s office is still a simple task.
Perhaps you’ve found a property owner in Dallas County, but cannot find useful lien records online. Simply visit the Dallas County Clerk Contact Information page to find the phone number you need, and reach out with the information you’ve gathered with Reonomy.
Another similar option would be to actually visit the county clerk’s office in person. In most cases, you’ll be able to find office addresses on the same webpages as phone numbers.
Whatever the case may be, the right combination of resources could be the difference in you finding the exact right property at the exact right time, through a quick and effective property lien search.