Liens and Lottery Winners

We endured several years of living beside the most disruptive and dysfunctional family imaginable. A lottery win got them into the house and financial mismanagement forced them out. Since they have left, we have a transformed neighborhood. A remarkable change.

We learned yesterday that apart from a mortgage, there were liens outstanding on their property when it was sold. No surprise. For those unfamiliar with liens, a lien is a charge on property to satisfy a debt or other obligation.

An owner may agree to place a lien on real property in order to obtain mortgage financing to purchase the property.

A lien on real property may also result from a debt of the property owner that is not directly connected to the ownership of the land. Examples include unpaid taxes.

If a debtor owner fails to pay a debt, and the creditor goes to court and obtains a judgment, the law usually permits the creditor to file that judgment in the land records so that it becomes a lien on the debtor’s real property. The creditor may then be paid by either foreclosing the lien, forcing a sale of the property to satisfy the debt, or waiting until the debtor wishes to sell the property.

If the debtor sells the property without satisfying the lien, the lien isn’t discharged and it may still be satisfied by a sale of the property, even after it’s been sold to a new owner. In most transactions, a bank or other mortgage lender will not provide mortgage financing until all liens on the property have been removed.

A worker or business supplying building materials may have a lien for the construction or improvement of real property.

Our former neighbors had liens across the board, both construction and credit.

I guess the moral of the story is that a lottery win, although a lucky break, doesn’t develop character or potential. And it certainly doesn’t teach you how to manage your money.