A lien is a form of security interest granted over an item of property to secure the payment of a debt or other obligation. The government instead of chasing a non-payer down and asking or begging him to pay his taxes will file a claim (lien) against the property.

The government files only as a last resort. Once the lien is filed and all other options are exasperated the government will then do basically one of two things, either the property may be seized and sold (a deed sale), or in some states the lien may be offered to investors (in the form of a tax certificate) with an accompanying right for the investor, after a specified period of time, to institute foreclosure proceedings (an out right sale of property).

First method is a deed sale; here the government will offer property for sale to public usually for the price of back tax amount due plus any fees, interest charges, and court costs.

The winning bidder purchases the deed to the property, becoming the new owner and obtaining all rights to the property - clear of any mortgages, deeds of trust, etc.

Second method is a lien certificate; here the government will allow an investor to pay the taxes on behalf of the owner. The investor will receive a certificate proving the investor paid the taxes owed. From here the investor does nothing but wait until the property owner finally decides to pay the late bill. Most all owners end up paying their late bill because if they do not the government can and will auction off the property right out from under the property owner to get money owed; this is a big incentive to pay property taxes and over 98% of owners do.

Once the late bill is settled the government will contact you asking for the certificate; when you provide the receipt the government will pay back the amount you originally paid plus interest - maybe over 20% Interest!

That is the answer in a nutshell to What Is A Tax Lien.

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