What is a tax lien and how does it affect a property's title?

What is a tax lien and how does it affect a property's title?

• A. A mortgage extension granted by the lender.
• B. A tax credit that reduces tax due.
• C. A government claim for unpaid taxes; must be resolved to clear title.
• D. A guarantee of title insurance.

Answer: (C)

A tax lien is a government claim for unpaid taxes that attaches to a property and stays in place until the taxes are paid or resolved. Because it sits on the title, it creates a cloud that prevents the seller from transferring clear, marketable title until the lien is satisfied and a release is recorded. In a sale, the lien must be paid off or negotiated with the taxing authority so the release can be filed, allowing the title to be considered clear. This is different from a mortgage extension, a tax credit, or a title insurance guarantee.

A tax lien is a government claim for unpaid taxes that attaches to a property and stays in place until the taxes are paid or resolved. Because it sits on the title, it creates a cloud that prevents the seller from transferring clear, marketable title until the lien is satisfied and a release is recorded. In a sale, the lien must be paid off or negotiated with the taxing authority so the release can be filed, allowing the title to be considered clear. This is different from a mortgage extension, a tax credit, or a title insurance guarantee.