What Is a Lien? How Liens Affect Your Home Purchase

You've found the perfect home in Utah and you're ready to make an offer. But when the preliminary title report arrives, it reveals something concerning: the property has liens against it. Should you walk away? Panic? Renegotiate? Understanding what liens are, how they work, and what they mean for your purchase is essential knowledge for any home buyer or property owner.

Liens are one of the most common issues discovered during title searches, yet they're also one of the most misunderstood aspects of real estate. Some liens are routine and easily handled at closing; others can derail a transaction or create unexpected liability. This comprehensive guide explains everything you need to know about liens in Utah real estate: what they are, the different types, how they're discovered, how they affect your purchase, and how they're cleared.

What Is a Lien and How Does It Work?

At its core, a lien is a legal mechanism that allows a creditor to claim an interest in your property as security for a debt you owe them. When a lien is placed on property (formally called "attaching" or "perfecting" a lien), it becomes a matter of public record, typically filed with the county recorder's office or another government agency.

The key characteristic of a lien is that it runs with the land. This means the lien attaches to the property itself, not just to the person who incurred the debt. If you sell property with a lien against it, the lien doesn't automatically disappear—it either must be paid from the sale proceeds, or it transfers to the new owner (though most lenders won't allow you to purchase property with existing liens, as we'll discuss).

Liens serve several purposes in our legal system. They give creditors leverage to get paid by making it difficult or impossible for the property owner to sell or refinance without addressing the debt. They establish priority among multiple creditors—in Utah, liens generally have priority based on the order they were recorded, with some exceptions. And they provide a mechanism for eventual collection: if the debt isn't paid voluntarily, the lienholder may be able to force the sale of the property through foreclosure or other legal proceedings.

What Are Voluntary vs. Involuntary Liens?

Liens fall into two broad categories based on how they're created: voluntary (consensual) liens and involuntary (non-consensual) liens.

Voluntary liens are liens you agree to as part of a transaction, most commonly when borrowing money. When you take out a mortgage to buy a home in Utah, you sign a deed of trust (Utah's equivalent of a mortgage) that gives your lender a lien against the property. You're voluntarily agreeing to this lien in exchange for the loan. If you don't make your payments, the lender can exercise their lien rights by foreclosing on the property. Home equity loans, HELOCs, and construction loans are other examples of voluntary liens.

Voluntary liens are generally not concerning because they're expected and understood by all parties. When you buy a home, you know it will have a lien from your mortgage, and when you buy from a seller, you expect their mortgage will be paid off at closing from your purchase funds.

Involuntary liens are liens placed on your property without your agreement, typically because you failed to pay a debt or obligation. These are the liens that create problems in real estate transactions. They arise by operation of law rather than by contract, and the property owner often doesn't realize they exist until a title search reveals them. Common involuntary liens include property tax liens (automatic when taxes aren't paid), mechanics liens (contractors file these for unpaid work), judgment liens (from lawsuit judgments), tax liens from the IRS or state, and HOA liens (for unpaid dues or assessments).

Involuntary liens are red flags in a title search because they indicate the property owner has unpaid debts or legal problems. While these liens can usually be cleared at closing, they may signal financial distress that could complicate the transaction.

What Are the Different Types of Liens You'll Encounter?

Understanding the specific types of liens helps you assess their significance and how they'll be handled. Here are the liens most commonly discovered in Utah real estate transactions:

Property Tax Liens

In Utah, property tax liens arise automatically on January 1 of each year for that year's taxes, even though the taxes aren't due until November. This automatic lien gives counties powerful collection rights. Property taxes always have super-priority, meaning they get paid before any other lien, regardless of when those other liens were recorded.

If property taxes remain unpaid, the county can eventually sell the property at a tax sale. Most title companies require proof that all property taxes are current before closing, and it's standard practice to prorate taxes between buyer and seller at closing.

Mechanics Liens

Mechanics liens (also called construction liens) protect contractors, subcontractors, suppliers, and laborers who provide work or materials for construction, renovation, or repair of real property. Utah's mechanics lien law (Title 38, Chapter 1a) gives these parties the right to file a lien if they're not paid.

What makes mechanics liens particularly tricky is timing. In Utah, contractors have 180 days from their last day of work to file a mechanics lien. This means you could purchase a property, and then weeks later, a contractor who worked for the previous owner could file a lien against your property for work done before you owned it. This is why new construction purchases are especially vulnerable to mechanics liens, and why title companies require lien waivers from contractors.

Judgment Liens

When someone sues you and wins a money judgment, they can record that judgment with the county recorder, creating a judgment lien against all real property you own in that county. In Utah, judgment liens are valid for eight years and can be renewed.

Judgment liens can arise from any kind of lawsuit: unpaid credit cards, car accidents, business disputes, breach of contract, medical bills, or divorce settlements. The judgment creditor doesn't need to take any action beyond recording the judgment—it automatically attaches to your property.

Tax Liens (IRS and State)

When you don't pay federal income taxes, the IRS can file a Notice of Federal Tax Lien, which attaches to all your property and rights to property. Similarly, the Utah State Tax Commission can file state tax liens for unpaid state income taxes. These liens are particularly problematic because government agencies have extensive collection powers and are often unwilling to negotiate.

Tax liens can complicate closings significantly. While the IRS and state will release liens when the tax debt is paid in full, they sometimes require payment before closing rather than from closing proceeds, or they may place restrictions on the release that delay recording.

HOA and Special Assessment Liens

If you own property in a homeowners association and don't pay your dues or special assessments, the HOA can place a lien on your property. In Utah, HOA liens can include not just the unpaid dues, but also late fees, interest, attorneys' fees, and collection costs—sometimes multiplying a $2,000 debt into a $10,000 lien.

HOA liens can be especially contentious because HOAs are often aggressive about collection and some have the power to foreclose on properties for unpaid dues.

How Are Liens Discovered During a Title Search?

Discovering liens is one of the primary purposes of the title search process. When you enter into a purchase agreement for Utah property, the title company begins a comprehensive examination of public records to identify every lien and encumbrance affecting the property.

The title examiner searches multiple sources. At the county recorder's office (in counties like Salt Lake, Utah, Davis, Weber, or Washington County), they search for recorded documents including deeds of trust, mortgages, mechanics liens, HOA liens, and any other recorded claims. At the clerk of court, they search for judgment liens and lawsuit records that might affect the property. Through tax assessor records, they verify property tax status and identify any delinquent taxes. They check federal records for IRS tax liens and state records for Utah State Tax Commission liens. For properties in HOAs, they may contact the association directly to confirm dues are current and obtain a lien search from the HOA.

The search focuses on the property's legal description and the names of current and past owners. Since liens can attach to a person and thereby affect their property, the title examiner must search all owners in the chain of title to ensure no one had liens that might cloud the current title.

Once the search is complete, all discovered liens are listed in the preliminary title report, typically in Schedule B-I (items that must be cleared before closing) or Schedule B-II (items that will remain as exceptions to title insurance coverage).

What Happens When a Property Has Liens? Can I Still Buy It?

Discovering that a property has liens doesn't necessarily mean you can't or shouldn't buy it. The critical questions are: what type of liens exist, how much are they for, and can they be cleared at closing?

In a typical transaction, the seller's mortgage (a voluntary lien) is the largest lien and is routinely paid off at closing. When you pay the purchase price, your funds are distributed in a specific order: first, any property tax liens are paid; second, the seller's mortgage is paid off; third, any other liens are satisfied in order of priority; and finally, whatever remains goes to the seller as their proceeds.

Your title company acts as an intermediary, obtaining payoff statements from all lienholders showing the exact amount needed to release each lien. At closing, they disburse funds directly to each lienholder and obtain releases showing the liens are satisfied. These releases are then recorded, clearing the liens from the public record.

However, complications arise when liens exceed the property's value. If the seller owes $350,000 on their mortgage but the property is only selling for $300,000, there isn't enough money to pay off the lien. In this situation, either the seller must bring $50,000 to closing to make up the difference, or the transaction becomes a short sale where the lender agrees to accept less than they're owed.

Another complication occurs with disputed liens. If the seller believes a lien is invalid (for example, they claim they never hired the contractor who filed a mechanics lien), the dispute may need to be resolved through negotiation or litigation before you can close. Title companies won't issue title insurance with disputed liens outstanding because they create too much risk.

How Do You Clear or Remove a Lien?

The process for clearing a lien depends on its type, amount, and whether it's disputed. Here's how the most common liens are resolved:

Mortgage/deed of trust liens: The title company obtains a payoff statement from the lender showing the exact amount to pay off the loan, including principal, interest through closing, and any fees. At closing, funds are wired or sent to the lender, who then records a reconveyance deed (for deeds of trust) or satisfaction of mortgage showing the lien is released. This is routine and handled thousands of times daily across Utah.

Property tax liens: The county treasurer provides a statement showing taxes owed. Payment is made to the county, and they issue a release or clearance. Often, current-year taxes are prorated between buyer and seller at closing, with the seller's portion paid from their proceeds.

Mechanics liens: If the lien is valid and uncontested, payment is made to the contractor or supplier who filed it, and they record a release of lien. If the lien is disputed, several approaches are possible: negotiating a settlement for less than the claimed amount, challenging the lien in court (mechanics liens can be invalidated if they weren't filed properly or timely), or bonding around the lien (putting up a bond so the sale can proceed while the dispute is resolved).

Judgment liens: Contact the judgment creditor or their attorney, negotiate a payoff amount (sometimes less than the full judgment if it's old or uncollectable), pay the agreed amount, and obtain a satisfaction of judgment to be recorded. Judgment liens can sometimes be removed if they've expired or if the debtor has filed bankruptcy.

Tax liens (IRS/State): For IRS liens, request a payoff and release, which can take several weeks. The IRS may agree to subordinate the lien (allowing the sale to proceed with their lien moving to second position) or discharge the lien from the specific property if there's equity to pay them. State tax liens follow a similar process with the Utah State Tax Commission.

HOA liens: Obtain a payoff statement from the HOA showing all amounts due (dues, assessments, late fees, interest, legal fees). Pay the full amount and obtain a release from the HOA to be recorded. Some HOAs are difficult to work with and may claim amounts beyond what's justified, requiring negotiation.

How Does Title Insurance Protect You From Liens?

Title insurance provides critical protection against lien-related risks, but it's important to understand what it does and doesn't cover. Your owner's title insurance policy protects you from liens that existed at the time you purchased the property but were not discovered during the title search. This could include liens that were filed but incorrectly indexed at the courthouse, liens filed in a different county that weren't found, judgment liens against someone with a similar name that were mistakenly attributed to your seller, or liens that were filed after the title search but before your deed was recorded.

If such a hidden lien is discovered after you take ownership, your title insurance company will do one of two things: pay to clear the lien on your behalf, or compensate you for your loss if the lien can't be cleared. The insurance company also pays your legal defense costs if you need to fight the lien in court.

However, title insurance does NOT cover liens that arise after you take ownership. If you buy the property and then don't pay your property taxes, hire a contractor and don't pay them, or get sued and have a judgment lien filed against you, those are your responsibility—they occurred after you purchased, so they're not covered by your title policy.

Additionally, before issuing your title policy, the title company will require all known liens to be cleared. The preliminary title report lists these as requirements that must be satisfied before closing. The title company won't issue insurance over known problems—their role is to ensure those problems are fixed, not to insure them.

This is why working with an experienced Utah title company is so valuable. Prospect Title has been conducting title searches and clearing liens for Utah properties since 1967. Our title examiners know where liens hide, how to identify them, and—crucially—how to clear them efficiently so your closing stays on track.

What If a Lien Is Filed After I Buy the Property?

One of the most stressful scenarios is discovering a lien that was filed against the property after you purchased it, but for work or debts that occurred before you owned it. This most commonly happens with mechanics liens, where a contractor who worked for the previous owner files a lien within Utah's 180-day filing window, but after you've already closed and moved in.

If this happens, several things come into play. First, examine your title insurance policy. Many modern title policies include gap coverage or extended mechanics lien coverage that protects you from liens filed shortly after closing for work done before you purchased. Second, review your purchase contract. Some contracts include seller warranties that they've paid all contractors and suppliers, giving you a breach of contract claim against the seller if liens appear. Third, contact your title company immediately. They'll investigate the lien, determine if it's valid, and work to resolve it—either through your title insurance or by pursuing the seller or contractor.

You may also have legal defenses. If you purchased the property as a bona fide purchaser for value without notice of the lien, and the lien wasn't recorded before your deed, you may have priority over the lien. This is a complex area of law requiring attorney assistance.