Property Tax Liens and Title Insurance: What Title Companies Check
TL;DR
Title insurance protects buyers and lenders against defects in property title, including undiscovered tax liens. During a title search, the title company checks for unpaid property taxes, tax liens, and special assessments. If delinquent taxes exist, they must be paid at closing before the deed transfers. Title insurance covers you if a tax lien was missed during the search. Always review the title commitment for property tax items before closing. Standard title insurance does not protect against future tax problems, only those that existed before the policy was issued.
What Title Companies Check
Before issuing a title insurance policy, the title company searches public records for:
- Unpaid property taxes for the current and prior years
- Tax liens filed by the county
- Special assessments (sewer, sidewalk, road improvement)
- Municipal liens for code violations or demolition costs
- Mello-Roos or community facilities district assessments (California)
Tax Liens and Title Priority
Property tax liens have "super-priority" status, meaning they come before all other liens, including the mortgage. A buyer who takes title to a property with unpaid taxes inherits the tax lien. This is why title companies are thorough about checking tax status before closing.
What Must Be Resolved Before Closing
- All delinquent property taxes must be paid
- Any penalties and interest must be cleared
- Tax certificates (in tax lien states) must be redeemed
- Current-year taxes are prorated between buyer and seller
What Title Insurance Covers
If the title company misses a tax lien during the search and you later discover it, title insurance covers the loss. However, standard title insurance does not cover:
- Taxes that become due after the policy date
- Special assessments created after closing
- Supplemental tax bills triggered by the purchase
For Buyers
Review the title commitment carefully. Look for any property tax exceptions listed. Ask the title company to confirm that all taxes are current. After closing, verify on the county's website that the property shows a clean tax record.
Also check whether the assessed value on the property you are buying is accurate. Use our free property tax analyzer to compare the assessment to comparable sales. If the property is over-assessed, an appeal after closing could lower your tax bill from day one.
Frequently Asked Questions
What should I know about property tax liens and title insurance: what title companies check?
Title insurance protects buyers and lenders against defects in property title, including undiscovered tax liens. During a title search, the title company checks for unpaid property taxes, tax liens, and special assessments. If delinquent taxes exist, they must be paid at closing before the deed transfers.
What Title Companies Check?
Before issuing a title insurance policy, the title company searches public records for:
What should I know about tax liens and title priority?
Property tax liens have "super-priority" status, meaning they come before all other liens, including the mortgage. A buyer who takes title to a property with unpaid taxes inherits the tax lien. This is why title companies are thorough about checking tax status before closing.
What Title Insurance Covers?
If the title company misses a tax lien during the search and you later discover it, title insurance covers the loss. However, standard title insurance does not cover:
What should I know about for buyers?
Review the title commitment carefully. Look for any property tax exceptions listed. Ask the title company to confirm that all taxes are current.