Lien

A lien is a legal claim against a property that secures a debt, such as a mortgage, unpaid taxes, a court judgment or an unpaid contractor. Liens must usually be paid or released before a sale or refinance can close, which makes them one of the first things to check on a BRRRR purchase.

Distressed properties attract liens: past-due taxes, code enforcement fines, utility balances and judgments against the seller. A title search before closing shows what is recorded, and the title company pays them from the seller's proceeds.

The rehab creates its own risk. A contractor or supplier who is not paid can file a mechanic's lien, and a new lender will not refinance with one on title. Collecting lien waivers with each payment to the contractor keeps the refinance clear.

Further reading: Lien on Wikipedia.