Which Liens Survive a Tax Deed Sale? The Complete Guide

The Dangerous Myth of "Clean Title"

I cannot tell you how many times I've heard this from new investors: "But the county sold it, so the title must be clean, right?"

Wrong. Critically, dangerously wrong.

A tax deed sale extinguishes most liens and encumbrances, but several categories of liens have legal priority that survives the auction. Understanding which ones survive — and how to identify them before you bid — is arguably the single most important due diligence skill a tax deed investor can develop.

Liens That Typically Survive a Tax Deed Sale

1. Federal Tax Liens (IRS)

This is the big one. Under 26 U.S.C. §7425(b), the IRS has a 120-day right of redemption after a tax deed sale. During this period, the IRS can reimburse your purchase price and reclaim the property.

But here's the real risk: if the IRS wasn't properly notified of the tax sale, their lien may not have been extinguished at all. I've seen cases where a $15,000 federal tax lien survived because the county failed to send proper notice to the IRS.

How to check: Search the county recorder's office for IRS liens and also check the federal tax lien database. This is one of the seven documents in our free Due Diligence Bundle.

2. Municipal and Special Assessment Liens

Code enforcement liens, demolition liens, utility liens, and special assessment districts can survive tax deed sales in many jurisdictions. These are particularly treacherous because they're not always recorded in the same place as traditional liens.

A property I examined in 2019 had $12,000 in accumulated code enforcement fines that survived the tax deed sale. The investor had no idea until the city sent a demand letter.

3. HOA Super Liens

In states with super lien statutes (like Florida, Nevada, and Colorado), a homeowners association's lien for unpaid assessments can have priority over even a first mortgage — and can survive a tax deed sale for the most recent assessment period.

4. Environmental Contamination Liability

Under CERCLA (the federal Superfund law), liability for environmental contamination runs with the land, not the owner. If you purchase a tax deed property that has underground storage tanks, contaminated soil, or other environmental issues, you may be responsible for cleanup costs that can easily exceed the property's value.

5. Easements and Restrictive Covenants

These are not liens in the traditional sense, but they survive virtually every type of sale, including tax deed auctions. A utility easement, a shared driveway agreement, or deed restrictions limiting property use will remain in effect.

Liens That Are Typically Extinguished

• Mortgages and deeds of trust
• Judgment liens from civil lawsuits
• Mechanic's liens (in most states)
• Most private liens and encumbrances

The Due Diligence Process

Before bidding on any tax deed property, you should:

• Run a full title search going back at least 20 years
• Check federal tax lien records at both the county and IRS level
• Contact the municipality for any outstanding code violations, demolition orders, or special assessments
• Search HOA records for unpaid assessments
• Order a Phase I environmental assessment for commercial properties or any property with suspected contamination
• Review all easements and covenants recorded against the property

The Bottom Line

The difference between a successful tax deed investor and one who gets burned almost always comes down to lien research. Every dollar you spend on pre-bid due diligence is insurance against potentially catastrophic surprises.