Tax lien
A tax lien is a government claim against property for unpaid tax. The term covers several different things that behave very differently.
Property tax liens outrank everything#
The one that reorganises every other claim on a property.
A property tax lien attaches to a specific parcel for taxes assessed on that parcel, and it takes priority regardless of when it arose. It sits ahead of a first mortgage recorded decades earlier.
Two consequences follow.
Servicers advance delinquent taxes and add the cost to the loan, because an unpaid tax bill genuinely threatens their security in a way nothing else does.
Tax liens survive foreclosure. A buyer at a sheriff's sale takes subject to them, and on Torrens property they survive under Minn. Stat. 508.25 without appearing as a memorial on the certificate.
A clean certificate of title is not evidence of an unencumbered parcel.
Federal and state tax liens are different#
These secure a personal tax debt rather than a charge on a particular parcel.
They attach to whatever the taxpayer owns, follow ordinary priority from the date of filing, and appear in a name-based title search.
A federal tax lien carries its own foreclosure complication: where the IRS was not given notice under IRC 7425, the lien survives the sale entirely and the buyer inherits it.
Minnesota does not sell tax liens#
Worth stating flatly, because a great deal of investing material assumes otherwise.
There are no Minnesota tax lien certificates. No investor holds the tax debt, no yield product exists, and there is nothing to buy.
Unpaid property taxes go delinquent, the county obtains a tax judgment, the parcel is sold to the State of Minnesota at a sale where nobody bids, a three-year redemption period runs, and title forfeits. The county later sells non-conservation parcels by state deed.
Material describing tax lien investing is written for Florida, Illinois, New Jersey, Iowa or Arizona.
Clearing one#
Property tax liens: pay the delinquent taxes, penalty, interest and costs, or enter a confession of judgment converting the balance into instalments over five to ten years.
Federal and state tax liens: pay and obtain a release, then record it. Paying alone leaves the record showing a live lien, which is the same problem for the next examiner.
Checking for them before you buy#
Three separate searches, because the three kinds live in different places.
Property tax liens — the county's tax records show delinquency and any certified special assessments. That is also where unpaid utility charges and abatement costs surface, since cities certify them onto the tax bill.
State tax liens — appear in a name-based title search.
Federal tax liens — also name-based, and on a foreclosure purchase the further question is whether the IRS was given notice under IRC 7425, because without it the lien survives the sale.
A title search covers the second and third. Only the county covers the first, and it is the one that outranks everything.