If a property has a tax lien, what must be done prior to title transfer?

If a property has a tax lien, what must be done prior to title transfer?

• A. The lien must be resolved (paid or negotiated) to clear title.
• B. The lien is automatically removed at closing.
• C. The lender must approve the sale regardless of lien.
• D. The lien transfers to the buyer's personal credit.

Answer: (A)

When a property has a tax lien, the title cannot be transferred until that lien is cleared. A tax lien sits on the property itself, so the title must be free of encumbrances for a new owner to receive clear ownership. The seller generally must resolve the lien—pay it off or obtain a release or payoff agreement—so the title can be conveyed without those claims. At closing, funds from the sale are used to satisfy the lien, or the parties arrange a payoff, ensuring the title examiner sees a clear title. Until that happens, the title remains encumbered and not marketable. The other possibilities don’t fit because a lien isn’t automatically removed at closing, and a lender’s approval doesn’t erase the lien. Also, tax liens stay with the property, not with the buyer’s personal credit, once the transfer occurs.

When a property has a tax lien, the title cannot be transferred until that lien is cleared. A tax lien sits on the property itself, so the title must be free of encumbrances for a new owner to receive clear ownership.

The seller generally must resolve the lien—pay it off or obtain a release or payoff agreement—so the title can be conveyed without those claims. At closing, funds from the sale are used to satisfy the lien, or the parties arrange a payoff, ensuring the title examiner sees a clear title. Until that happens, the title remains encumbered and not marketable.

The other possibilities don’t fit because a lien isn’t automatically removed at closing, and a lender’s approval doesn’t erase the lien. Also, tax liens stay with the property, not with the buyer’s personal credit, once the transfer occurs.