CandleFocus Glossary Editor
A tax lien certificate is a legal document that a governmental authority, such as a municipality, county or state, issues when it sells the right to collect unpaid taxes from a taxpayer. The document defines the amount of the unpaid tax, grants to the holder of the certificate the legal right to collect the tax and establishes the amount of interest that will be due to the holder.
Tax lien certificates are also referred to as tax delinquent liens, tax certificates, tax liens, or tax sale certificates. Tax liens can either be general or specific, and can apply to a single taxpayer or multiple taxpayers. A general lien applies to all of a taxpayer’s current and future assets, while a specific lien applies to a particular piece of property or other asset.
When someone purchases a tax lien certificate, they are essentially buying the right to collect the unpaid taxes from the property or asset identified on it. This is usually done at a tax lien sale or auction, where buyers bid on the right to receive the unpaid taxes and the associated interest. Once the payment is made, the buyer assumes the right to collect the taxes and the resulting interest from the taxpayer.
Tax lien certificate investments can provide several advantages to investors, including: a source of income in the form of interest on the unpaid taxes; the potential to earn a return on the original investment if they are able to negotiate an early repayment of the tax debt; and the ability to gain rights to the underlying asset if the taxpayer defaults.
It is important to point out, however, that the presence of a tax lien does not mean the property is owned by the investor. In the case of government-issued tax liens, the owner of the lien must fully comply with all local rules and regulations before taking ownership of the property. Even then, the investor may only receive a portion of the outstanding debt, minus any expenses or fees, if any, associated with collecting the debt.
In summary, a tax lien certificate is a legal document that grants an investor the right to collect unpaid taxes from a taxpayer. Purchasing a tax lien certificate gives investors access to potential income from the interest on the unpaid taxes, the potential to recoup their investment if they are able to negotiate early repayment, and in some cases, to take ownership of the underlying asset if the taxpayer defaults.
Tax lien certificates are also referred to as tax delinquent liens, tax certificates, tax liens, or tax sale certificates. Tax liens can either be general or specific, and can apply to a single taxpayer or multiple taxpayers. A general lien applies to all of a taxpayer’s current and future assets, while a specific lien applies to a particular piece of property or other asset.
When someone purchases a tax lien certificate, they are essentially buying the right to collect the unpaid taxes from the property or asset identified on it. This is usually done at a tax lien sale or auction, where buyers bid on the right to receive the unpaid taxes and the associated interest. Once the payment is made, the buyer assumes the right to collect the taxes and the resulting interest from the taxpayer.
Tax lien certificate investments can provide several advantages to investors, including: a source of income in the form of interest on the unpaid taxes; the potential to earn a return on the original investment if they are able to negotiate an early repayment of the tax debt; and the ability to gain rights to the underlying asset if the taxpayer defaults.
It is important to point out, however, that the presence of a tax lien does not mean the property is owned by the investor. In the case of government-issued tax liens, the owner of the lien must fully comply with all local rules and regulations before taking ownership of the property. Even then, the investor may only receive a portion of the outstanding debt, minus any expenses or fees, if any, associated with collecting the debt.
In summary, a tax lien certificate is a legal document that grants an investor the right to collect unpaid taxes from a taxpayer. Purchasing a tax lien certificate gives investors access to potential income from the interest on the unpaid taxes, the potential to recoup their investment if they are able to negotiate early repayment, and in some cases, to take ownership of the underlying asset if the taxpayer defaults.