Liens are a consequential feature of many commercial real estate transactions in Idaho. As such, whether you are buying, selling or developing commercial property, understanding how liens work can help you avoid legal disputes and financial setbacks.
A lien is a legal claim against a property that functions as security for a debt. Liens can affect a property’s title, financing options and overall marketability If a property owner does not satisfy a debt secured by a lien, the lienholder may have the right to take legal action, which can lead to foreclosure. In commercial real estate, liens often arise from unpaid loans, contractor disputes, tax obligations and court judgments.
Common types of liens that may affect commercial real estate
Several types of liens may be placed on commercial property, each with different legal and financial implications. They include:
- Mortgage Liens: These arise when a property is used as collateral for a loan. If the owner defaults, the lender has the right to foreclose on the property.
- Mechanic’s Liens: Contractors, subcontractors and suppliers can file a lien if they have not been paid for work performed on the property. These liens must be resolved before a property can be sold or refinanced.
- Tax Liens: Unpaid property taxes or federal and state tax debts can result in a lien placed on the property. Government agencies can enforce these liens through a tax sale or foreclosure.
- Judgment Liens: If a court awards a financial judgment against a property owner, the winning party may place a lien on the property until the debt is satisfied.
Liens can complicate transactions by creating obstacles to clear titles. Buyers typically do not want to purchase a property with outstanding liens, and lenders may refuse to finance a deal until liens are resolved. Sellers must ensure that all liens are properly addressed before closing, either by paying off debts or negotiating lien releases. Seeking legal guidance accordingly is usually a good way to get started on either “side” of such issues.
