How to check for liens before closing

Why you need to check for liens before closing

A lien is a legal claim against a property that secures payment of a debt. If you buy a home with an undiscovered lien, you may inherit that debt — even if the previous owner incurred it. Liens can arise from unpaid property taxes, contractor work, homeowner association fees, or municipal code violations. A thorough lien search before closing protects you from these financial surprises and ensures you receive clear ownership.

What a standard title search reveals

A title search examines public records to verify property ownership and identify existing claims or liens. This process, often carried out by a title company or attorney, can reveal recorded liens such as mortgages, judgments, and tax liens. The search is typically ordered after a purchase agreement is signed and completed before closing. However, not all liens are recorded in the county clerk's official records. Some liens — called unrecorded or municipal liens — may not appear in a standard title search.

The hidden risk of municipal liens

Municipal liens are imposed by local governments for unpaid utility bills, special assessments, code violations, or open permits. These obligations are often not recorded in public records, so a routine title search will miss them. If you take title to a property with an outstanding municipal lien, that liability transfers to you. Most standard title insurance policies do not cover municipal liens, leaving you exposed. A municipal lien search prior to closing protects the buyer from hidden issues that the title search won't reveal.

Step-by-step checklist for checking liens before closing

Follow these actionable steps to ensure you identify all potential liens before your closing date:

1. Order a professional title search. Work with a title company or abstracting firm to examine public records for recorded liens, judgments, and ownership gaps. This should be done as soon as your purchase agreement is signed.
2. Request a municipal lien search. Ask your title professional to perform a separate municipal lien search with the local city or county. This identifies unrecorded debts such as unpaid water bills, sewer charges, and code violation fines.
3. Review the preliminary title report. Carefully read the title commitment or preliminary report. Look for any exceptions, encumbrances, or listed liens. Ask your attorney or title officer to explain anything you don't understand.
4. Check for open permits. Unresolved building permits can lead to future liens or enforcement actions. Confirm that all permits on the property have been closed properly.
5. Verify HOA or condo association status. If the property is part of a homeowners association or condominium, request an estoppel letter or status report to confirm there are no unpaid assessments or special charges.
6. Resolve any discovered liens before closing. If a lien is found, work with the seller to have it paid off or released before you take title. Do not proceed to closing until all liens are cleared.

What to do if a lien is found

If a lien appears during the search, you have several options:

• Require the seller to pay the lien at closing. The funds can be taken from the seller's proceeds.
• Negotiate a price reduction to account for the lien amount.
• Delay closing until the lien is resolved and a release is recorded.
• Walk away if the seller cannot or will not resolve the issue and your contract allows it.

How the Featured Expert Can Help

Hazelwood & Associates, LLC is an owner-operated title abstracting and mineral search firm based in Wise, Virginia, with over 14 years of experience. They provide detailed title examinations and document retrieval for residential and commercial clients, helping you identify liens and ensure clear ownership before closing. Their BBB A+ rating reflects a commitment to thorough, reliable service.

Quiz: Test your knowledge

Which type of lien is often not found in a standard title search and requires a separate search?

• Municipal liens for unpaid utility bills or code violations
• Recorded mortgage liens
• Federal tax liens