Property Tax Lien Information

by Kay Miranda

A lien can be placed on a property for many reasons. These include failure to pay property taxes, income taxes, or a mechanic's lien, which results from failure to pay a builder, plumber or contractor of any sort. When searching the title, a lien is defined in the chain of title, thus becoming a part of the property ownership for failure to pay property taxes. Property tax liens only further financial problems for many homeowners while the liens become a gold mine for investors who understand how to make money from this area of the market.

Definition of a Lien

A lien is a document that designates a security interest in property that serves to secure debt payments. Security interest may be given voluntarily or involuntarily. A person seek a private loan and give the lender a lien on property as collateral. Most often liens are placed on real estate, but may be other assets. The lien defines the obligation of the owner to another party and if that obligation is not paid, the owner gives up ownership rights in part or whole.

Property Tax Lien

Every piece of real estate has property taxes owed annually on the property. If these are not paid on time, a Notice of Tax Lien will be issued to the property owner citing the state regulations with the penalties that can result for the tax lien. In most states, the property owner has one year to make the lien whole, meaning to pay it and any penalties associated with the tardiness of it. Within this time several notices will be mailed and perhaps served. If the property tax lien is left unpaid after these attempts to collect have been made, the property may be seized and placed in foreclosure auction.

Remain Until Paid

Property tax liens "run with the land," meaning they remain with the chain of title until they are completely fulfilled in payment. This is why a complete title search is essential for any property an investor will buy. If there is a tax lien on the property and it is not satisfied or negotiated to be satisfied by the escrow terms, the tax lien becomes the problem of the new owner. While title insurance may cover errors in discovering title issues such as this, if no remedies were provided for in escrow proceedings and the tax lien is not satisfied by the new owner, the property may be seized and sold in foreclosure.

Removal of Tax Lien

Once the property taxes are paid, the property owner should retain the receipt with all pertinent title paperwork. While the tax lien should be removed immediately after the property taxes and penalties are paid in full, this sometimes does not happen. Property owners should physically visit the county registrar and ensure that the lien is on record as being satisfied and has been removed clearing the title on the property.

Investors Gold Mine

When someone is behind on property taxes, they are sent notices. Being a matter of public record, savvy real estate investors understand that acquiring this information gives them advance notice to foreclosures or other financially distressed homes with all the information available at the country registrar's office. Laws vary from state to state, but in some states, such as Texas, by paying the owed property tax lien, the person can obtain the tax lien certificate and seize the property with the same rights of the state if the lien is not paid to the person who satisfied the lien. In other states, such as California, tax deed sales are often conducted as auctions.

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