What Are the Legal Risks of Buying Property With Undisclosed Liens?
June 23, 2025
Purchasing property is one of the most significant financial decisions most people will make in their lifetime. While the excitement of acquiring a new home or investment property can be overwhelming, it’s essential to fully understand the legal risks involved, especially when it comes to liens.
A lien is a legal claim on property as security for a debt or obligation. When buying a property with undisclosed liens, you may face a range of financial, legal, and ownership complications that can jeopardize your investment.
In Texas, the law requires that sellers disclose any known liens or other encumbrances on a property before a sale. However, sometimes these liens aren’t disclosed, either intentionally or due to oversight.
When you buy a property with undisclosed liens, you might inherit these financial obligations, which can lead to costly legal battles, loss of property, and damage to your financial future. This is where working with a real estate attorney can be invaluable.
At The Law Office of Aaron Fonseca, PLLC in Edinburg, Texas, I can guide you through the process, mitigate risks, and make sure your transaction is legitimate and protected. Let’s explore some of the legal risks of buying property with undisclosed liens and how working with a real estate attorney can help you manage this process.
What Are Liens and How Do They Affect Property?
Before getting into the risks of buying property with undisclosed liens, it’s essential to understand what liens are and how they can impact property ownership. A lien is essentially a legal right or interest that a creditor has in a debtor’s property, typically as a result of an unpaid debt.
In the context of real estate, liens can arise from various circumstances, such as unpaid property taxes, contractor fees, or mortgages.
Liens come in different forms, including:
Mortgage liens: When you take out a loan to purchase a home, the lender places a lien on the property as collateral.
Tax liens: If a property owner fails to pay property taxes, the government can place a lien on the property.
Mechanic’s liens: Contractors or subcontractors can file a lien on a property if they aren’t paid for services or materials provided during construction or renovation.
Judgment liens: If a court rules in favor of a creditor, a judgment lien can be placed on the property to secure the debt.
Understanding the various types of liens and how they can impact property ownership is crucial when purchasing real estate, as these legal claims can affect your rights and responsibilities as a property owner.
The Risks of Buying Property With Undisclosed Liens
While liens are a common part of property transactions, buying property with undisclosed liens can lead to a host of legal and financial problems. When a lien is undisclosed, it’s often the buyer's responsibility to resolve it after the purchase. Below are some of the most significant risks:
Liability for the Debt
One of the primary risks of buying property with undisclosed liens is that you may become responsible for the outstanding debt. For example, if there’s an unpaid mortgage or contractor’s lien, you could be held liable for paying off that debt before you can fully take ownership of the property.
If the lien remains unpaid, the creditor may be able to place a claim on the property, seize it, or foreclose on it, even though you’re the rightful owner.
Legal Complications and Disputes
Undisclosed liens can lead to lengthy and costly legal disputes. If the seller failed to disclose the lien, they could be in breach of contract, and you may need to take legal action to recover damages.
Additionally, if the lienholder takes legal action against the property, you might have to engage in expensive litigation to resolve the issue. In some cases, this could mean that you must settle the debt or fight in court to clear the property title.
Damage to Your Credit Score
If you inherit an undisclosed lien and fail to pay it off, your credit score could be negatively impacted. Unpaid liens can be reported to credit bureaus, making it harder for you to secure financing in the future. A low credit score can affect your ability to apply for mortgages, car loans, or other financial products, which could have long-term financial consequences.
Inability to Sell or Refinance the Property
When you buy a property with undisclosed liens, it could make it difficult, or even impossible, to sell or refinance the property in the future. The lien will remain attached to the property, and the new buyer or lender will likely require that the lien be resolved before proceeding with the transaction.
This means you may not be able to access the full value of your property until the lien is cleared.
Loss of Property
In the worst-case scenario, a lienholder may be able to seize the property if the debt remains unpaid. This can occur through a legal process known as a lien foreclosure. For example, a tax lien could lead to the government seizing the property to pay off the unpaid taxes.
This would result in the loss of your investment and the property itself, leaving you with a significant financial loss.
How a Real Estate Attorney Can Help
Understanding the intricacies of property transactions, especially when dealing with undisclosed liens, can be challenging. This is where a real estate attorney becomes invaluable. Here are the benefits of working with a real estate attorney when purchasing property:
Conducting Title Search and Due Diligence
A real estate attorney can conduct a thorough title search to make sure there are no undisclosed liens or other encumbrances on the property before you finalize the transaction.
This due diligence step is crucial for identifying any existing legal claims on the property that could impact your ownership rights. If any liens are found, the attorney can assist in resolving them before the sale.
Assisting With Contract Review and Protection
A real estate attorney will review the purchase agreement and other legal documents to check that they’re in your best interests. They can identify clauses that could leave you vulnerable to undisclosed liens or other legal issues.
With the attorney’s assistance, you can protect yourself from potential pitfalls and make sure that the seller is held accountable for any undisclosed issues.
Negotiating Liens and Settling Debts
If undisclosed liens are found during the transaction process, a real estate attorney can help you negotiate with the lienholder to resolve the debt. This may involve negotiating a payment plan or reducing the amount owed to clear the lien.
Your attorney can also guide you through the legal process of removing the lien from the property title so that you can proceed with the purchase without any issues.
Representing You in Court
In the event of a legal dispute over an undisclosed lien, having a real estate attorney by your side can be crucial. The attorney can represent you in court, making sure that your rights are protected throughout the litigation process. Whether the issue involves a breach of contract or a dispute with a creditor, your attorney can advocate on your behalf to resolve the situation.
Allowing for a Smooth Transaction
Ultimately, working with a real estate attorney helps the property transaction proceed smoothly and without any legal or financial complications. Your attorney will take the necessary steps to verify that the property is free of undisclosed liens, review contracts for any potential issues, and make sure that your interests are protected every step of the way.
What to Do If You Discover a Lien After the Purchase
If you discover an undisclosed lien after purchasing property, it’s essential to take immediate action. Here are the steps you should take:
Contact a real estate attorney: Your attorney can help you determine the most favorable course of action for resolving the lien.
Review the contract: Check if the seller is in breach of the contract by failing to disclose the lien.
Negotiate with the lienholder: Try to resolve the lien by negotiating a settlement or payment plan.
File a lawsuit: If necessary, you may need to file a lawsuit against the seller for breach of contract or fraud.
If you discover a lien after purchasing property, taking swift action can help resolve the issue and protect your investment.
Speak to a Real Estate Attorney Today
Whether you’re a first-time homebuyer or a seasoned real estate investor, protecting yourself from undisclosed liens should be a top priority. Contact me, Attorney Fonseca of the Law Office of Aaron Fonseca, PLLC, to help you understand the intricacies of the real estate market and make sure that your investments are secure. I’m proud to serve clients in Edinburg, McAllen, Mission, and the Rio Grande Valley areas. Reach out today.