All You Need To Know About a Municipal Lien

A municipal lien is a claim against a business’s property or assets. Until the lien is released, it provides the creditor with a security interest in the property. According to the municipal lien definition, the municipal corporation places a lien against the owner for the owner’s share of a public improvement that specifically and individually provides benefits to the owner. If a business fails to pay off a debt, the law allows a creditor to file a claim. Lien type depends on the type of debt owed by the business. A municipal lien certificate is a legal document that includes all assessments, property tax certificates, water bills, electricity bills, and all other charges owed on a property. This document is required at the time of sale. 

What Is a Municipal Lien Search?

If you are planning to purchase a property, how will you know whether there are additional hidden charges associated with the purchase such as liens, unresolved violations, and building permit issues? A complete business lien search is the answer to uncover all liens on a property. The new owner can become liable for overlooked bills, building permits that are not closed properly, as well as unresolved violations. A municipal lien search will identify all unrecorded liens and other obligations linked with the property. 

If a municipal lien search is required it is usually the title company’s responsibility to obtain all the relevant business lien search information regarding the property. A trusted lien search company will provide a full municipal lien search, including code violations, utility information, open/expired permits, tax information, and public special assessments. 

Different Types of Liens

Municipality files a claim of lien for unpaid municipal services. These municipal lien claims will include the cost of removal of dangerous buildings, removal of debris, and unpaid bills. It would also include assessment for refuse collection service, sidewalk construction or repair, improvement of sanitary facilities, and similar obligations. A business lien search can save a lot of time and expenses for the buyers. We provide complete services to make your next purchase hassle-free. Following are the various types of liens that can impact a purchase:

1. Home-Buying Liens

You may be excited to find the right house for purchase, but your lien search company reveals alarming results that there are liens against the property. Well, this does not mean that you cannot proceed with the deal. The closing may require some time as the seller will have to pay off all liens. Often, a lien search company discloses the first lien as a mortgage, meaning the bank will have the first lien to the property. The lien remains in the record until the loan is paid off. However, the property can be encumbered many times, meaning other institutions have laid a claim to the property, for instance, a municipal lien against the property for violations and unpaid bills. The seller is required to pay off all liens before transferring clear and free title to the buyer.

2. Property Tax Liens

Involuntary liens are filed when a homeowner fails to pay property taxes. A municipal lien is imposed in this case, as the town or city files a property tax lien against the property. Whether there are files after the first or second mortgage, municipal liens have a higher ranking than the creditor's lien. If the homeowner cannot pay the property taxes, the municipality can sell the property under a foreclosure process to recover tax bill payments. Usually, foreclosures are not preferred by the municipalities as the process can take several months or even longer. Property with municipal lien becomes risky. A patient buyer can obtain the home at a reduced price.

3. IRS Tax Liens

If you fail to pay income taxes timely, the government can file a legal claim against your property. Your tax liability will be analyzed by the IRS and a Notice of Federal Tax Lien will be sent to you. A business lien search will identify all kinds of liens against a property. The notice will warn creditors that the government has the legal right to the property. You should always file and pay all taxes timely. 

4. Judgment Liens

Judgment lien occurs when a creditor successfully sues the property owner for non-payment. The creditor can seek to recover the debt by seizing the bank account or foreclose on the property. If the judgment is won, it is attached with the lien that the creditor is entitled.

5. Mechanic’s Liens

Like a municipal lien can be placed for the construction of a sidewalk, similarly, the mechanic lien is associated with construction work. If a contractor performs work or provides material for construction on your property and they are not paid for the work, a mechanic lien can be placed. Prospect buyers can only know about such liens through a business lien search. 

Why Is the Municipal Lien Important? 

A buyer cannot take clear possession of the title until all liens are removed and obligations are settled. Municipalities have the right to place a municipal lien against real estate for all the unpaid liabilities by the property owner. It is essential to obtain a business lien search as it is worth the small price you are going to pay now; it will save you thousands of dollars down the road. A municipal lien becomes a red flag for the buyer of your property. Any creditor can place a notice on the property until the debt is paid off before selling or transferring the title of your property.

Get in Touch with the Best Lien Search Company

CertSimple provides you with the best property closing solutions according to your needs. You don’t have spare time to spend hours gathering information about a potential property. Our business lien search is coming soon and will give you detailed information regarding any liens and obligations on the property you intend to buy. We make the entire process of obtaining a municipal lien report hassle-free for you.

CertSimple USA, LLC provides services in all 254 Texas counties. 

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