How to Check if Liens Exist on Used Equipment Before Purchase

[MikePhua]

When purchasing used heavy equipment, one crucial step is to ensure that there are no liens or outstanding financial obligations tied to the machine. A lien is a legal claim against an asset, such as a piece of equipment, due to unpaid debts. If you buy equipment that still has a lien on it, you could face legal issues or financial obligations if the lienholder decides to claim the equipment. This guide will outline how to check for liens on used equipment before making a purchase.
Understanding Liens on Equipment
A lien on heavy equipment means that a creditor (such as a bank or a lender) has a legal right to the equipment until the borrower settles the debt. If the debt remains unpaid, the creditor may repossess the equipment, and the new owner could be left with the responsibility to pay off the debt or face losing the equipment.
Why Checking for Liens is Important
Checking for liens is important for several reasons:

• Financial Security: Buying equipment with a lien could mean you are liable for the outstanding debt.
  
• Legal Issues: If a lien is discovered after the sale, you may have to return the equipment or deal with legal claims.
  
• Avoid Hidden Costs: Liens may carry interest or legal fees that could add significant costs to your purchase.
  

How to Check for Liens on Used Equipment

1. Request the Equipment’s Serial Number
   

The first step in checking for liens is to get the equipment’s serial number. This is a unique identifier for the machine and is used in the records of equipment owners and lienholders.

1. Check with the Seller
   

Before you proceed with any formal searches, always ask the seller directly about any liens. A reputable seller should disclose any financial obligations tied to the equipment. However, this information is not always reliable, especially if the seller is unaware of existing liens or omits the information intentionally.

1. Search Public Records
   

Liens on equipment are typically recorded with government agencies or financial institutions. To check for liens, you can search the following sources:

• Local County Clerk or Recorder’s Office: Depending on your location, liens may be registered with local authorities. Visit or contact the local government office to inquire if they have a lien record for the equipment based on its serial number or the seller’s name.
  
• State Vehicle or Equipment Title Department: In many states, equipment with a significant value, such as heavy machinery, is titled. These titles include any liens or encumbrances on the property. Visit your local Department of Motor Vehicles (DMV) or the appropriate state department and use the serial number to check the title status of the equipment.
  

1. Use Online Lien Search Services
   

Many third-party companies offer online lien search services for heavy equipment. These services can look up the equipment’s serial number in national and regional databases to see if there are any liens recorded. Some services may charge a fee, but they can save time and provide more comprehensive results.

• National Equipment Register (NER): NER provides a lien search service specifically for heavy equipment. It is a trusted source to verify the legal status of used machinery.
  
• Commercial Lien Services: Several commercial lien services, such as CreditSafe and Experian, provide lien search tools that may include machinery or equipment.
  

1. Request a Lien Waiver from the Seller
   

To further protect yourself, request a lien waiver from the seller. This document confirms that the seller has settled any outstanding debts and that the equipment is free of liens. This is particularly important when buying equipment from a dealer or other business entity.

1. Check with Equipment Financing Companies
   

If the equipment was financed by a lender, you can contact the financing institution to check if any liens are still on the equipment. If the loan was paid off, the lien should have been released, but checking with the lender ensures that this process was completed.

1. Ask for Documentation of Lien Release
   

If a lien was recorded, ask the seller to provide documentation of the lien’s release. The lienholder should have issued a formal release once the debt was settled. This document is crucial to ensure that you are not liable for the previous owner’s debt.
What to Do if You Discover a Lien
If you discover a lien on the equipment you want to purchase, here are your options:

• Negotiate with the Seller: If the lien is valid, you may want to negotiate with the seller to either clear the lien before the purchase or adjust the price to reflect the cost of paying off the lien.
  
• Contact the Lienholder: If the seller cannot clear the lien, you may need to contact the lienholder directly. It’s possible that the lienholder may be willing to release the lien once they’ve received payment from you.
  
• Walk Away from the Deal: If the lien cannot be resolved, it’s often best to walk away from the deal. You may not want to assume the risk of paying off someone else’s debt.
  

Conclusion
When buying used equipment, checking for liens is an essential step to ensure you are making a safe and financially sound investment. By obtaining the serial number and conducting a thorough lien search through public records or third-party services, you can avoid legal complications and financial liabilities. Always be proactive in ensuring that the equipment you are purchasing is free from any outstanding claims or debts.