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Title & legal

Tax Lien

Also called Property tax lien

In short

A tax lien is a government's legal claim against a property for unpaid taxes. Property tax liens usually take priority over mortgages and can lead to a tax lien certificate sale or tax deed sale.

Who files it
A local government or the IRS
Priority
Property tax liens usually come first
Sale methods
Tax lien certificate or tax deed
Risk for buyers
Can survive a mortgage foreclosure

Property tax liens

When property taxes go unpaid, the county or city places a lien on the property. In most states, property tax liens take priority over mortgages and other liens, even ones recorded earlier. If the taxes remain unpaid, the government can eventually sell either the lien or the property itself to collect.

Tax lien and tax deed sales

States use different systems. In tax lien certificate states, investors buy the right to collect the delinquent taxes plus interest; the owner can redeem by paying, and if not, the certificate holder may eventually be able to obtain title. In tax deed states, the property itself is sold at auction. Some states use a mix. Interest rates, redemption periods and procedures vary by state, so review local rules carefully.

Federal and state tax liens

The IRS and state revenue agencies can also file liens for unpaid income or other taxes. These generally attach to all of the taxpayer's property. Their priority relative to a mortgage usually depends on when they were filed, and a federal tax lien can give the IRS a right to redeem the property for a period after a foreclosure sale.

Example

A tax lien on a foreclosure

An investor plans to bid on a home at a mortgage foreclosure sale. The title search shows $8,200 in delinquent property taxes. Because property tax liens usually have priority over the mortgage, the investor expects that lien to survive the sale and lowers the maximum bid from $150,000 to about $141,800 to cover it.

Tax Lien vs. Lien

Tax Lien

A tax lien is a government's legal claim against a property for unpaid taxes. Property tax liens usually take priority over mortgages and can lead to a tax lien certificate sale or tax deed sale.

Lien

A lien is a legal claim against a property that secures a debt. It must usually be paid off before the property can be sold with clear title, and the creditor can force a sale in some cases.

The differenceLien is the general term for any claim against a property. A tax lien is a specific kind filed by a government for unpaid taxes, and it often has priority over other liens.

Frequently Asked Questions

Related terms

Title SearchTitle & legalA title search is a review of public records to confirm who legally owns a property and to find any liens, judgments, easements or other claims that could affect ownership.Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.Right of RedemptionForeclosure processA right of redemption lets a foreclosed homeowner reclaim the property by paying the full amount owed, either before the foreclosure sale or, in some states, for a set period after it.Title InsuranceBuying & closingTitle insurance protects a buyer or lender against losses from ownership problems that existed before the purchase, such as undisclosed liens, forged documents or recording errors. It is paid once at closing.Zombie PropertyForeclosure processA zombie property is a home the owner has vacated during foreclosure, but where the lender has not completed the foreclosure, leaving it empty with the original owner still holding title.EscrowBuying & closingEscrow is an arrangement where a neutral third party holds money or documents until the conditions of a deal are met. The term also refers to the account a lender uses to pay a borrower's property taxes and insurance.Quitclaim DeedTitle & legalA quitclaim deed transfers whatever ownership interest the seller has in a property, if any, without any promise that the title is valid or free of liens.PITIMortgages & financingPITI stands for principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment. Lenders use it to judge whether a borrower can afford a home.

Learn more in the knowledge base

Title, Liens and Due Diligence on Distressed PropertiesGuide · 9 min readDistressed properties often come with debts and paperwork problems attached. A title search, a clear understanding of which liens survive a sale and the right title insurance protect you from inheriting someone else's obligations. This guide explains what to check and when.Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.How Foreclosure Auctions Work: A Guide for First-Time BiddersGuide · 8 min readA foreclosure auction is the public sale where a lender's collateral is sold to repay a defaulted loan. Rules on notice, payment, title and redemption are set by state law, and buyers usually pay cash for a home they have never been inside. This guide explains how the process works so you know what you are bidding on.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.