Q: We purchased our property in 2008 with a land contract. The contract states that the property that is sold to us be “unencumbered.”
Now we’ve discovered that there is a lienA Lien is an encumbrance against the property, which may be voluntary or involuntary. There are many different kinds of liens, including a tax lien (for unpaid federal, state, or real estate taxes), a judgment lien (for monetary judgments by a court of law), a mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. lien (when you take out a mortgage), and a mechanic's lien (for work done by a contractor on the property that has not been paid for). For a lien to be attached to the property's title, it must usually be filed or recorded with a local county government office. for unpaid county property taxes from 2001. The titleTitle refers to the ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! of a particular piece of property. search did not find the lien. We’d like to know who is responsible for paying the tax bill. And, is the contract voidVoid refers to a contract or document that is not enforceable. since the property is not unencumbered?
A: When you buy a property under a land contract, you are buying the home over time. You make your payments and when you have completed making all of the payments, the seller transfers legal title to the home to you.
If you worked with a real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate. to help you through the land contract purchase process, the attorney would have recommended that purchase (or receive from the seller) a title insuranceTitle Insurance is insurance that protects the lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. and the property owner against losses arising from undisclosed defects or problems with the title to property. policy for a contract purchase of a home.
If you bought an owner’s title insurance policy, then the title insurance company would pay the tax and make you whole in this situation because the title companyA Title Company is the corporation or company that insures the status of title on real estate (called title insurance) at a closing, and may handle other aspects of the real estate closing. didn’t find that the taxes were unpaid. If you didn’t buy an owner’s policy, you would likely owe the tax but could sue the seller for failure to give you unencumbered title.
In any event, it’s unlikely that the land contract to purchase the property would be void, but rather that the seller breached his or her obligation to give you unencumbered title to the property. If you are still making payments to the seller under the land contract, you may be entitled to deduct from those payments an amount necessary to pay the amount owed for taxes.
Please talk to a real estate attorney for further details.