What are Tax Lien Certificates? 

 

Property taxes are an important part of your county government’s revenue stream.  These taxes are used to pay for public schools, police and fire departments.  When county residents fail to pay their property taxes, the government is forced to create a tax lien on the property.  In many states, the county government then sells these liens to an outside party as investments in a tax sale.  The state statute mandates the details of this tax sale.  To encourage the purchase of these liens, the state government also mandates an interest rate or return for that investor.   

 When a particular investor successfully purchases a tax lien, he or she is given a Tax Lien Certificate.  This certificate represents the property tax lien purchased and any and all principal and interest owed to the investor.   
 
 To encourage "redemption" (a pay off) by the property owner, the state also may mandate that after a specified period the certificate owner is given the legal right to foreclose on the property.  In this case, a tax deed may be issued in place of the tax certificate, giving full property rights to the new owner.