Real property taxes are secured by an automatic
statutory lien against the property, but they are not the
personal obligation of the property owner. This means that
the government can sell the property if the taxes are not
paid, but cannot personally sue the owner. Anyone purchasing
tax certificates from the government stands in the same position
-- after a specified period of time, the purchaser of the
tax certificate can foreclose on the property and collect
from the proceeds of sale.
Tax liens take precedence over all other liens and encumbrances,
regardless of when they were recorded. If the property is
sold for back taxes, all existing mortgages are wiped out
and the purchaser at the tax sale takes free and clear. Conversely,
if a private mortgage is foreclosed, it has no effect on the
lien for taxes, because the tax lien is senior to all others.
Whoever purchases the property at the tax sale will have to
pay the back taxes.
Other items affecting title, such as judgment, mechanics’,
and materialmen's liens, claims of homestead, and homeowner's
association dues and assessments, are also wiped out. The
purpose of this rule, or course, is to insure that the government
is in first place and that property taxes are always paid.
If this theory were taken to its logical conclusion, everything
affecting title to the property would be terminated by a tax
sale. Experience has shown that such a rule would be harsh
and unwise. As a result, three exceptions have developed.
The first exception is for public roadways, easements,
and right-of-way. It is the universal rule that public roads
and easements are not affected by a tax sale, regardless of
the seniority of the tax lien. This makes sense and avoids
the obvious problems that would be created if public rights-of-way
were terminated every time there is a tax sale.
The second exception is for private easements. This
exception exists in most (but not all) states. Some states,
like Arizona, have a specific statute that provides that private
easements survive a tax sale. In some other states the courts
recognize this exception as a matter of common law. It is
a very useful and beneficial rule that preserves access to
property and utility line easements after a tax sale, much
like the exception for public rights-of-way. A few states,
including Florida, Maryland, and New Jersey, do not recognize
this exception, and in these states private easements are
terminated by a tax sale.
The third exception is for restrictive covenants,
sometimes called deed restrictions. This exception has been
recognized in a number of states but expressly rejected in
others. Some states, like Arizona, have not yet addressed
the issue. States that recognize this exception believe it
would be unfair and destructive of property values to have
restrictive covenants that become voided after a tax sale.
In a leading case, the court held that deed restrictions prohibiting
the sale of alcohol on all lots in a subdivision should survive
the tax sale of one lot in that subdivision. The contrary
rule, of course, would free one lot from the restriction while
all the others would continue to be bound by it, an obviously
unfair situation that could harm the value of the remaining
Tax liens are senior to all other liens and encumbrances,
and upon a tax sale all such junior liens and encumbrances
are terminated. Some states provide that private easements
and restrictive covenants will survive a tax sale.
If you hold a deed of trust or mortgage against real property,
it is a good idea to periodically check to make sure that
the taxes are current. If you have a foreclosure, you will
be responsible for all back taxes. And if a tax sale occurs,
your lien could be wiped out.
Return To Legal