Cloudy Title

We found out about a bogus $14,000 lien against one of our rentals today. Bogus liens are a multi-million dollar industry. Photo by: WUNC

This post originally appeared on the Hermit Haus Redevelopment website on 2016-02-04.

It is ridiculously easy to put a lien on someone’s property in Texas.

This morning I was talking to our banker at First Texas Bank about a Home Equity Line of Credit (HELoC) we are in the process of taking out in the company name using a house Suna and I own free and clear. This is a strategy to help build credit in the Hermit Haus name. The company is responsible for paying back the loan, but Suna and I are still on the hook. It’s like cosigning for your kid’s car.

During that call, I found out that a bank put a lien on our Lloydminister property—the one we own free and clear—in the name of Susan Kendall and her husband. The bogus lien is for roughly $14,000. That’s no pittance in anybody’s book.

Apparently, having a name that sounds like someone else is good enough. Someone at that bank decided that Susan Kendall must be the same person as Sue Ann Kendall and filed a lien on our property. Texas has no mechanism to check the legitimacy of these liens. The state blithely assumes that anyone filing such a lien must be correct and homeowners are guilty until proven innocent.

I have known about the possibility of these bogus liens for years, but I have never encountered one before. In checking with a couple of Realtors, I was told situations like this one happen “all the time.” The problem apparently amounts to millions of dollars each year in legalized fraud or robbery, depending on how you want to look at it. The good news is that the lien holder can’t force us into foreclosure. They have to wait until we find out about their scheme or sell the property.

Many people don’t find out about one of these bogus liens until they have a contract to sell their property. Then they are under too much time pressure to fight the fraud and end up paying for someone else’s debt just to be able to sell their own property. But on the positive side, it’s the title company’s job to clear these things up, and, given time, they are pretty good about clearing them up.

Luckily we found out with time to fight. Keep following this series to learn more as I do.