Lien
A legal claim registered against a property as security for an unpaid debt, preventing the property from being sold or transferred until the debt is settled.
What is a Lien?
A lien gives a creditor a legal right over a property until a debt is repaid. In New Zealand, liens can arise in several ways. A builder who hasn't been paid for construction work may register a charging order against the property. The IRD (Inland Revenue Department) can register a statutory land charge for unpaid taxes. A body corporate can place a lien for unpaid levies.
Liens are registered on the certificate of title and effectively prevent the property from being transferred until the debt is resolved. They are a warning to any potential buyer that there are outstanding financial obligations attached to the property.
A lien differs from a mortgage in that a mortgage is voluntarily given by the property owner, while a lien is typically imposed by a creditor to protect an unpaid debt.
Why It Matters for Due Diligence
A lien on a property you want to buy must be resolved before settlement. If the title search reveals a lien, your lawyer should raise it with the seller's lawyer immediately. The seller must clear the debt and have the lien removed before ownership can transfer.
Be cautious if a property has multiple liens or a history of liens — it may indicate financial distress, which could complicate the transaction or suggest the property has been poorly maintained due to the owner's financial difficulties.
How to Check
Liens appear on the certificate of title obtained through LINZ. Your lawyer will identify any liens during the standard title search and raise them with the seller's lawyer. The lien must be discharged before settlement can proceed.
Frequently Asked Questions
Can I buy a property with a lien on it?
The lien must be removed before the title can be transferred to you. The seller is responsible for settling the debt and having the lien discharged. Your lawyer will ensure this happens before settlement.
What types of debts can lead to a lien on a property?
Common debts that result in liens include unpaid building or construction costs, overdue council rates, unpaid body corporate levies, and tax debts owed to the IRD.
Related Terms
Registered Interest
GlossaryAny right or claim recorded on the property's certificate of title, such as a mortgage, easement, covenant, or caveat.
Caveat
GlossaryA legal notice registered on a property's certificate of title warning that someone claims an interest in the property.
Mortgage
GlossaryA loan from a bank or lender secured against the property, giving the lender the right to sell the property if the borrower defaults on repayments.
Settlement
GlossaryThe day ownership of a property officially transfers from the seller to the buyer and the purchase price is paid in full.
Body Corporate
GlossaryThe legal entity made up of all unit title owners in a multi-unit development, responsible for managing common property and shared affairs.
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