Tax Lien

A tax lien is a lien imposed by the government on the title to the property in order to secure the payment of taxes. The taxes can be owed on real as well as personal property. The tax lien is also enforced as a result of failure to pay income taxes or others.

For example, Joseph owns a property in New Jersey valued 600,000. He owes $50,000 as taxes to the government. But he fails to pay the taxes. Thus, the government placed a lien against his property. This type of lien is known as tax lien.

In case of property taxes, the current owner often has to pay the taxes which were previously incurred by the prior owner. There are various ways of paying property taxes in order to avoid a tax lien.

• The owner or the mortgage holder can pay the property taxes from the amount deposited in the escrow account. Both the owner and the mortgage holder receive a notice when the property taxes are delinquent. Even if the owner does not have an escrow account, the mortgage company may pay the taxes. The company will then demand repayment from the owner. They may also create an escrow account to get back the amount they have paid on behalf of the former.
  
  
• The owner may sell off the property prior to tax foreclosure by the government. In this case, the taxes are paid as a part of the closing costs from the sale proceeds.
  
  
• The property can be seized and sold at a tax lien sale. In some states, the tax lien is offered to investors who also have the right to conduct foreclosure proceedings after a specified time period.

Related Article:

• Escrow and its significance

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