
Liens on a property are legal claims against a homeowner’s financial assets, typically established due to unpaid debt or other financial obligations. A lien on your property must be resolved before ownership can be transferred to a new buyer.
Navigating real estate transactions with liens, such as a mortgage lien, judgment lien, or property tax lien, can be complex, especially in Ocean County, New Jersey, but understanding the process can make the experience manageable.
Kristen E. Johnson, Esq., a seasoned real estate attorney with over 20 years of experience in Monmouth and Ocean County, New Jersey, has guided countless clients through the complexities of real estate transactions, including the resolution of liens. Here’s what you need to know about how liens are handled when selling your home.
What is a Lien?
A property lien is a legal claim against a property that can significantly impact its sale or purchase. Essentially, it acts as an encumbrance, giving the lienholder the right to seize and sell the property to satisfy an unpaid debt. Property liens can be categorized as either voluntary or involuntary.
Voluntary liens, such as mortgage liens, are agreed upon by the property owner, typically when taking out a mortgage loan. Involuntary liens, on the other hand, are imposed by a court or government agency, such as a tax lien for unpaid property taxes. Understanding the nature of these liens is crucial for any homeowner or potential buyer.
Liens During a Home Sale
The first step in addressing liens is to verify their validity. Sometimes liens are old, filed in error or satisfied but not recorded. Kristen’s knowledge of New Jersey real estate law allows her to investigate liens and determine their reality.
In some cases you may be able to negotiate a reduced payoff or payment plan with the lienholder. This is often the case with judgment or tax liens. Kristen’s foreclosure expertise is key in these negotiations to protect her clients.
Most liens must be paid in full before or at closing. The sale proceeds are used to pay off the lien. For example a mortgage lien, the mortgage lender is paid directly from the sale proceeds. Once the lien is paid off it’s important to request a lien release or discharge from the lienholder. This document proves the debt is satisfied and must be recorded with the county to clear the title.

It’s highly recommended to have an experienced real estate attorney. Kristen E. Johnson, Esq. can help verify lien information, negotiate with lienholders and ensure documentation is proper to make the process smooth.
Types of Property Liens
There are two main categories of liens: voluntary liens and involuntary liens. Common property liens include mortgage liens, which are voluntarily created when a homeowner takes out a mortgage loan to purchase property, and property tax liens, which arise when a property owner fails to pay property taxes. Federal tax liens, filed by the IRS for unpaid federal income taxes, can impact both real and personal property.
Judgment liens result from court judgments, often due to credit card debt, medical bills, personal loans, or other unpaid debts. A judgment lien is a claim against any real estate owned by a debtor, highlighting the legal implications that follow if debts are not satisfied. Mechanic’s liens may be filed by contractors or suppliers for unpaid work or materials provided to improve the property. A mechanic’s lien can be placed on a property when homeowners fail to pay for renovation or construction work. Estate tax liens apply to property inherited by heirs when estate taxes are owed.
An estate tax lien is a type of involuntary lien issued by the government when estate taxes are not paid on property inherited after someone’s death. HOA liens are filed by homeowners associations for unpaid dues or fees. Child support liens may also be issued for unpaid court-ordered child support payments. General liens, like federal tax liens, can apply to all the debtor’s property, while specific liens, such as mortgage liens, are tied to a particular asset.
How Liens Affect Real Estate Transactions
Liens can complicate real estate transactions in several ways. For sellers, a lien can make it challenging to find a willing buyer, as most buyers are hesitant to purchase a property with existing financial claims. For buyers, obtaining financing can be difficult if the property has a lien, as lenders are wary of providing loans on encumbered properties.
However, it’s not all doom and gloom; liens can sometimes be resolved through the proceeds of the property sale, making it possible to clear the debt and transfer a clean title to the new owner.
Finding and Removing Liens

Discovering liens on a property is a critical step in any real estate transaction. A thorough title search, often conducted by a title company or real estate agent, can reveal any existing liens.
Additionally, checking with the county records office can provide information on recorded liens. Once identified, removing a lien typically involves paying off the debt it secures. This can be done through refinancing, selling the property, or negotiating a settlement with the lienholder.
In some cases, legal action may be necessary to contest the lien. Professional assistance from a real estate agent or attorney can be invaluable in navigating this process.
Selling a Home with a Property Tax Lien
Selling a property subject to a lien is possible, but the process must address the unpaid debt to clear the lien. An IRS lien can significantly impact the sale process, as it remains with the property until the debt is resolved. Sellers may opt to pay off the lien before the sale, a common approach for mortgage liens, where the mortgage debt is settled at closing.
Failing to pay taxes can lead to severe legal repercussions, including the imposition of a federal tax lien on the property. Negotiating with creditors is another option, as some may accept less than the full amount owed, especially for judgment liens or other unsecured creditors. In rare cases, buyers may agree to assume the lien, but this typically requires lender approval. In more extreme situations, if the homeowner fails to resolve the lien, the property may be sold through a foreclosure process.
Legal Implications of Unpaid Liens
Unpaid liens carry serious legal consequences for property owners. If a lien remains unpaid, the lienholder has the legal right to seize and sell the property to recover the debt. This can lead to foreclosure, resulting in the loss of the property.
Additionally, unpaid liens can severely damage the property owner’s credit score, making it difficult to obtain future financing. It’s crucial to address any liens promptly to avoid these severe repercussions.
Do I Need an Attorney to Sell a Property with a Lien?
Yes, having an attorney is highly recommended when selling a property with a lien. The complexities of dealing with different types of liens—such as mortgage liens, judgment liens, property tax liens, federal tax liens, and mechanic’s liens—require specialized legal knowledge. An attorney can help navigate these complexities, negotiate with lienholders, and ensure that all legal requirements are met.
In New Jersey, where property laws give significant power to liens, having legal guidance is crucial. An attorney can help you understand your rights, avoid foreclosure, and ensure a smooth transaction, providing peace of mind throughout the process.
The Sales Process When a Lien Exists
Selling a property with a lien involves several steps. IRS liens must be addressed before the property can be sold, as they can complicate the transfer of ownership and affect the buyer’s ability to secure financing. A title search is essential to uncover any real estate liens or claims recorded in public records. Once the liens are identified, the property owner must assess the amount of debt owed, which can include mortgage debt, unpaid taxes, or creditor claims.
Liens must be addressed before or at closing, often with sales proceeds being used to pay the lienholder directly. For instance, a mortgage lender is typically paid first if there is a first mortgage on the property. Working with a real estate agent experienced in lien-related issues and a law firm knowledgeable in real estate transactions can be invaluable. Once the lien is satisfied, the property can be transferred to the buyer, ensuring the title is free of encumbrances.
Advice for Sellers with Property Liens
If you’re dealing with a lien on your property, it’s important to take proactive steps. It is crucial to pay income taxes on time to avoid the imposition of federal tax liens, which can complicate the sale of your property. Start by hiring a real estate attorney and consulting with your real estate agent, as they can guide you through clearing liens and negotiating with creditors.
Identifying liens before listing your property is crucial, and a title search through the county records office can reveal any legal claims against the property. Communicate with creditors to negotiate payment terms or partial settlements for unpaid debt. Financial planning is essential, as liens like income taxes or HOA liens must be resolved, so be prepared for these expenses when setting the sale price of your home.
Keeping Liens In Mind
Selling a home with real estate liens requires careful planning, transparency, and professional assistance. Mechanic’s liens, filed by contractors for unpaid work, must also be resolved to ensure a successful property sale.
Whether it’s a mortgage lien, property tax lien, or federal tax lien, resolving these issues is critical to a successful sale. By addressing unpaid taxes, creditor claims, or missed payments proactively, you can ensure a smoother real estate transaction. For expert guidance on navigating property liens in New Jersey, contact KEJ Law, a law firm with extensive experience in handling complex real estate matters.