What is a Property Tax Lien?
A property tax lien is a legal claim imposed by a government entity against a property when the owner fails to pay property taxes owed. This lien serves as a security interest for the tax debt, meaning the government has the right to seize the property if the taxes remain unpaid for a specified period.
When a property tax lien is placed, it is recorded in the local land records, which can affect the property owner’s ability to sell or refinance the property. Before selling a property, all tax liens must typically be resolved. Failure to pay the property taxes can lead to foreclosure, where the government may auction off the property to recover the owed taxes.
Property tax liens are prioritized over most other types of liens, meaning they hold a higher legal standing in the event of a sale or foreclosure. Investors sometimes purchase tax lien certificates at auctions. This allows them to receive the amount owed plus interest if the property owner pays off the tax debt. However, if the owner does not resolve the lien, the investor may ultimately gain ownership of the property.
Understanding property tax liens is essential for homeowners and investors alike, as they can greatly impact property ownership and financial health. Keeping up with property tax payments is crucial to avoid the complications associated with tax liens and potential loss of property.