Tax Lien
A tax lien is a government claim against property for unpaid taxes. Learn priority rules, redemption periods, and how tax liens affect sales.
Definition
A tax lien is a legal claim by a government authority against a property when the owner fails to pay taxes owed, typically property taxes or income taxes. The lien attaches to the property title, giving the government priority over other creditors. In many states, tax liens can lead to tax lien sales or tax deed sales, where investors purchase the lien or property to recoup unpaid taxes. Property owners can clear the lien by paying the tax debt plus interest and penalties during a redemption period. Tax liens must be satisfied before selling or refinancing the property.
Why It Matters
Unpaid property tax outranks the mortgage. A county lien sits ahead of nearly every other claim, so it comes out of closing proceeds before the seller sees a dollar, and if the arrears run long enough the county can take the property outright. In Washington, counties may start foreclosure once taxes are three years delinquent, which arrives faster than most owners in trouble expect.
Examples
A Pierce County seller carrying $9,400 in back taxes, interest and penalties watches the full amount come off their $61,000 of equity on the settlement statement.
A federal income tax lien for $28,000 filed against one spouse attaches to the jointly held house and stalls a refinance until the IRS issues a discharge.
An investor buys a delinquent tax certificate at auction, collects statutory interest for two years, and is then redeemed by the owner rather than ending up with the house.
Tips
Pull the county treasurer's parcel record yourself before listing, since the balance shown there includes accrued interest and penalties that a remembered figure will understate.
For a federal lien, start the certificate of discharge request as soon as you have a contract; IRS review commonly runs 30 to 45 days and closing will not wait on it.
Run a name search on every person on title, not just the parcel number, because liens recorded against an individual can attach to the property and surface after the preliminary commitment.
Related Terms
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Encumbrance
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