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ComplianceFinanceMay 17, 2024

What is a municipal lien search, and why do I need it?

By: Wolters Kluwer Compliance Solutions staff

A municipal lien search locates unrecorded municipal liens, utility violations, code violations, special assessments, and permitting issues associated with residential and commercial property. It is recommended that you conduct a municipal lien search as part of your real property loan due diligence. 

The information you’ll receive in a municipal lien search goes beyond the traditional title search, which only locates recorded liens on a property. It protects creditors' financial interests should a debtor owe on municipal liens, mainly when the creditor uses property for collateral. It also minimizes liability should the debtor default and the creditor has to levy the property.

While a title search is crucial for uncovering recorded liens on a property, it's equally important to recognize the necessity of a municipal lien search. Many are unaware that various unrecorded charges and potential liabilities may exist, which could eventually lead to a lien. These charges, unaddressed violations, improperly closed permits, or unpermitted structures can shift from the previous owner to the current one if left unresolved. This underscores the significance of conducting a thorough municipal lien search to ensure full awareness and mitigate potential risks for the new property owner.

Understanding liens and their impact

Any lien, including municipal liens, can significantly impact transactions with your debtors. They are legal claims against the property, usually because of an unpaid debt or obligation.

Undisclosed liens create significant risk, including financial liabilities and legal disputes, should you have to recover collateral due to nonpayment on financed equipment. Even if you are unaware of a lien on property you hold as collateral, you could be responsible for resolving it should you have to take the property instead of paying.

Should you try to sell the collateral to recover your money, unresolved liens can delay or prevent a sale. Liens can also result in increased costs.

What is included in a municipal lien search?

A municipal lien search includes several types of lien searches, including:

Property taxes

A property tax lien search provides a snapshot of the three most recent tax years of property you are considering using as collateral. The report shows delinquent taxes owed, issues tax certificates, and provides the current amount due when applicable.

Special assessments

While some municipalities record special assessments with the clerk of court, others keep this information out of public view, making it difficult for you to do comprehensive due diligence before a financial transaction. A special assessment search locates any special assessments, filed publicly or not, and includes payoff information good for 30 days from the initial search request.

Code violations and liens

In many cases, cities and counties do not record money owed for ongoing violations. This could lead to the debtor owing thousands of dollars on property – and the money owed won’t appear on traditional title searches. Payoff letters for any unresolved code violations or liens placed by zoning which are good for 30 days can be provided when necessary.

Open and expired permits

Open and expired permits may have fees due to building code violations. A fine could accumulate interest and cause late charges if it was never paid. A search provides this information and can include resolution services upon request.


In some cases, utility companies could file liens on properties. A municipal lien search includes a search for utility liens and unpaid bills.

The importance of municipal lien searches for property buyers

Often, the critical part of due diligence – a municipal lien search – is overlooked. This is important in protecting your investment and avoiding legal and financial issues. Often, these liabilities are hidden and won’t cloud the title to a property.

A municipal lien search also helps financial institutions decide whether to use property as collateral to lend money to a debtor. When you identify liens and property-related issues that could be used as collateral, you can assess potential risks and factor them into negotiations.

Finally, a municipal lien search, combined with other lien searches, helps ensure the property being used as collateral has a clear title should you transfer it from the debtor due to nonpayment. Encumbrances upon the property could delay or complicate the process and cause additional financial losses.

Completing thorough due diligence, including lien searches, signifies to your investors that you are serious about your business and are doing everything you can to protect the business from financial harm from debtors.

Benefits of obtaining a clean municipal lien search report

Completing a municipal lien search provides several benefits during the due diligence phase of a transaction. For example, it ensures there are no hidden encumbrances on collateral, safeguarding your investment and the credit you extend. It is also beneficial to conduct periodic municipal lien searches to keep abreast of any new liens the debtor may incur. In addition to providing a clear title for any collateral you accept, understanding the lien status through such searches increases your negotiating power. It helps in adjusting the interest rates you charge appropriately. 

Before extending credit or using certain property as collateral, contact a company that provides municipal lien searches to order a comprehensive liens search, including a municipal lien search, tax record lien search, and UCC lien search.

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Wolters Kluwer Compliance Solutions staff
The Compliance Solutions staff is comprised of experts who offer the insight required to better satisfy borrowers, secure capital, and navigate regulatory change.
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