Federal Tax Liens: What they are and how they affect real estate.

When title companies research property, we conduct a search of public records for previous owners and transfers of title (back at least 25 years to meet the Marketable Title Act practices), outstanding mortgages, unpaid taxes, and many other items that may affect title to the property.  You may not know, but we also search for liens, judgments, and encumbrances of all parties to the transaction that may affect title to the property.  There may be an outstanding mortgage or unpaid taxes to pay off at closing, but sometimes state and federal tax liens can show up in court cases or Register of Deeds searches.  When taxes are not paid or a governmental entity determines there is a deficiency in the amount paid, the state and/ or IRS can file a lien on the title owner.  These liens attach to ALL property owned by the vested title owner, and yes, this even includes inherited property.  That being said, even if the lien does not specifically reference the real estate being sold or purchased, if the seller or buyer has a federal tax lien filed against them, we need to make sure all lien(s) are paid off at closing, so they do not attach to the real estate.

 

 

 

 

 

How long can these liens hang around you ask?  Federal tax liens are self-releasing liens, meaning they automatically drop off; however they can stay in effect 10 years past the last day for refiling.  Best practices and according to the law, the liens can be reinstated up to 30 days past this.  Long story short, when having a title search done, you can trust that we will diligently search the property and parties involved to insure a clear title.

 

By: Angela Turner