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What Are Municipal Lien Searches? Real Estate Closing Tips

HOA Documents, Title & Escrow,
Published: Feb 01, 2024
Last Edited: Feb 20, 2024
by Editorial team

Conducting Municipal Lien Searches is a crucial aspect of many real estate transactions, often underestimated by professionals. While it may lead to additional work and unexpected issues, it provides a comprehensive overview of potential financial or legal obligations tied to the property in question. 

Municipal Lien Searches help uncover information that may not have been recorded in public records, usually because these liens are applied at a local level and might not be immediately updated in other databases. 

So, let’s look at municipal lien searches, why real estate professionals should care about them, and how to ensure they don’t ruin your closings. 

Municipal Lien Search - Rexera

A Municipal Lien Search is a process of identifying any unrecorded liens, code violations, and hidden obligations associated with a property. It proves vital, especially before the closing, when thorough due diligence is necessary. The liens could include unpaid utility bills, unresolved code enforcement violations, open or expired permits, and special assessments.

This information is not typically uncovered in a standard title search, which only provides access to public records, thus excluding this crucial information.

The Importance of Municipal Lien Searches

The primary purpose of conducting a Municipal Lien Search is to ensure that the property in question is free from any undisclosed debts. This way, the interests of all parties involved in the real estate transaction can be safeguarded.

an electricity line with electric towers

When it comes to real estate deals, a Municipal Lien Search is packed with crucial elements that you just can’t overlook. It typically includes access to the following:

  • Lien payoff statement
  • Special assessments
  • Utility balances
  • Code violations
  • Open/expired permits

Understanding these documents is key for title and escrow officers. By getting a handle on how they can impact property transactions, real estate professionals can smoothly tackle the maze of uncovering and dealing with liens for a hassle-free and transparent real estate closing, keeping everything above the fold and crystal clear.

But there are a few undisclosed liens that agents should stay vigilant about and make sure to check for, like any unrecorded Municipal Liens. 

What Is an Unrecorded Municipal Lien?

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An unrecorded municipal lien is a lien that is not disclosed in public records. These liens can pose a significant risk in real estate transactions, especially during the closing process, potentially leading to future financial liabilities for the property owner. They may not be covered by title insurance.

Types of Liens Uncovered

A thorough municipal lien search can unveil numerous types of liens. These can range from voluntary liens, such as a mortgage, to involuntary liens, representing debts owed to a specific party. 

Some common types of liens that can be revealed are:

  • Real Estate Property Taxes 
  • Special Assessments
  • Back taxes to IRS
  • Building Violations
  • Code Enforcement Violations
  • Open or Expired Permits
  • Mechanic’s Liens (e.g., linked to construction work)
  • Unpaid Utilities (e.g., water, sewer, solid waste)
  • County Debts

Understanding the nature of these liens is essential in ensuring a clear property title. And here’s why.

Implications of Hidden Municipal Liens in Real Estate Transactions

As a title or escrow officer, being aware of how unrecorded municipal liens impact real estate transactions is key to protecting the interests of your customers. Unrecorded municipal liens can pose specific risks and potential financial liabilities that directly impact the closing process. 

Here are a few of those risks and how to deal with them. 

Risks of Undisclosed Obligations

Understanding the significance of unrecorded municipal liens allows you to identify potential risks associated with undisclosed financial obligations proactively. By uncovering these liens early in the transaction process, you can work towards resolving them before closing, thereby mitigating risks and ensuring a transparent and timely closing process.

By actively addressing unrecorded municipal liens, you can ensure that your clients, including buyers and sellers, are protected from any unexpected financial burdens or legal issues associated with the property. This preemptive action contributes to building trust and confidence among your clients.

Mortgage Eligibility

Recognizing the impact of unrecorded municipal liens on mortgage eligibility allows you to guide clients through the process, highlighting the importance of addressing any undisclosed obligations to ensure a property’s eligibility for mortgage approval. 

This proactive approach can help expedite the closing process and prevent potential delays due to mortgage eligibility issues.

wooden door with too mailbox lids, one say A one saying B

While both title searches and Municipal Lien Searches are integral to the real estate transaction process, they serve different purposes. A Title Search primarily focuses on examining public records to validate the legal ownership of the property and discover any recorded liens or encumbrances on the title.

Title Searches

  • Focus: Primarily concerned with establishing the legal ownership of a property
  • Purpose: Uncover any existing liens, mortgages, or other encumbrances on the property’s title
  • Scope: Generally covers the entire history of the property’s ownership

On the other hand, a Municipal Lien Search delves deeper, identifying unrecorded liens and other potential obligations that may not appear in public records. These could include unresolved building code violations, open or expired permits, special assessments, and unpaid utility bills.

Municipal Lien Searches

  • Focus: Aimed at revealing any outstanding debts or violations associated with the property.
  • Purpose: Identify unpaid property taxes, code violations, special assessments, or other municipal charges.
  • Scope: Typically concentrates on the property’s relationship with the local government and any outstanding financial obligations.

How Understanding Municipal Lien Searches Benefits Your Title Business?

piles of documents stalked on top of each other in an office environment

By delving into the details of municipal lien searches, your title business can operate more effectively and provide added value to clients in the real estate industry. 

Here’s how knowing the ins and outs of Municipal Liens will help you. 

Comprehensive Due Diligence

Recognizing that municipal lien searches go beyond the scope of title searches enables you to advocate for thorough due diligence in real estate transactions. By emphasizing the importance of both types of searches, you can ensure that all potential financial or legal obligations associated with the property are uncovered, providing a comprehensive view for your clients and smooth, on-time closings. 

Risk Mitigation and Client Confidence

Educating clients about the distinct purposes and processes of title searches and municipal lien searches allows you to mitigate risks associated with closings actively. It helps you provide clients with confidence in the transparency and integrity of the transaction process. This understanding helps foster trust and credibility in your professional expertise.

Facilitating Efficient Closings

By guiding clients through the differences between these searches, you can facilitate efficient closings. Showcasing the need for comprehensive due diligence ensures potential risks are addressed before the closing process. These efforts contribute to a smoother and more streamlined transaction experience.

a table full of old mechanical clocks

The process of requesting a municipal lien search can vary significantly depending on the municipality and the nature of the property. 

The process can entail multiple calls to local firms, and each municipality has different turnaround times. Some municipalities may complete a search within 5 business days, while others may take up to 20 business days.

Our advice is to initiate a municipal lien search as early as possible to identify and resolve any potential issues before finalizing the transaction.

You can also turn to professionals who will help navigate the intricacies of Lien Searches and speed up the process of gathering the information. 

Efficient Handling of Unrecorded Liens 

Imagine the following: you’re working on a property closing, but you find out that a water company put an unrecorded lien on the property. It did not show up in the title search. Now, the new owner has to pay the dues. No one is happy.

To avoid situations where liens cause trouble, you have to identify the management company for each utility, which is often difficult to get hold of. Apart from that, different departments within those utility companies are not well connected, which will create even more back and forth. It means you have to contact each of them and get written confirmation if there are any liens or not. 

Identifying and obtaining full information on any undisclosed liens can be a challenging task.  

To resolve any issues stemming from Municipal Liens, title, and escrow professionals might consider solutions that help them streamline Municipal Liens Searches. Implementing processes and solutions that efficiently automate and quickly fact-check information without unnecessary delays and complexities can significantly improve the experience for both real estate professionals and their customers.

Rexera can help you with your Muni Liens. 

Utilizing Rexera for Streamlined Solutions

Rexera specializes in services that utilize AI technologies and human expertise to provide you with verified information quickly.

Efficient Information Retrieval

We give you access to comprehensive and reliable data without wasting time going through multiple departments and utility management companies.

Facilitating Due Diligence

We offer a centralized platform to access verified information related to unrecorded liens, utility obligations, and property-specific details, ultimately contributing to a transparent and efficient real estate transaction process for you and your clients. 

With Rexera Munical Liens Search, you can speed up the process of closing transactions by 33%

Wrapping up

an archival retro drawers

For title and escrow officers, conducting Municipal Lien Searches stands as a critical safeguard for real estate transactions. Conducting a comprehensive search ensures that the property you’re closing has no hidden debts or obligations. Lien searches act as insurance against potential risks for all parties involved. With the possibility of uncovering hidden financial burdens lurking beneath the surface, the value of a thorough Municipal Lien Search and investing resources in thorough fact-checking cannot be overstated. 

For more information or questions on municipal lien searches and how Rexera can help you streamline the process and safeguard your closings, contact us.

In the meantime, you can always subscribe to Rexera’s blog so you keep up-to-date with everything related to real estate strategy and HOA asset management.

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