WHAT EVERY LAWYER SHOULD

KNOW ABOUT PROPERTY TAXES

An insiders' guide to the confusing world of property taxation from BRUSNIAK TURNER.

Providing insight and saving lawyers research time and their clients money since 1981

HAPPY NEW YEAR!

CELEBRATE WITH A SURPRISE PROPERTY TAX LIEN!

© John Brusniak 2025

On New Year’s Eve, as you were welcoming in the New Year, a property tax lien silently snuck past you and attached itself to your taxable real and personal property. Not the kind of lien you find recorded in the deed records—but an automatic statutory lien. It has its own less festive designation for the date liens take effect each year: “Tax Lien Day.” Thus, January 1 is both “New Year’s Day” and “Tax Lien Day.”

IT'S GOOD TO BE THE KING!

Remember junior high history class when you learned about the feudal system? Under it, the king was the sole owner of everything. He granted his subjects possessory rights to use his property—provided they paid an annual tithe. Possessory interests ended when the “tithe payer” died. The Magna Carta changed that. It granted “tithe payers” the right to convey their possessory interests and to devise them to their heirs. But the Magna Carta did not abolish the tithe. Later, the tithe became the property tax. The king continued to retain the right to reclaim his former property if his subjects failed to pay the taxes assessed against them. That royal right to reclaim property for unpaid taxes now belongs to the king’s successors, our state and local governments.

If you fail to pay the property taxes assessed against your home, your business real property, or your business personal property, the government can, and will, take your property away from you. A property tax lien has the highest priority amongst all liens in Texas.

I JUST PUT A LIEN ON YOUR PROPERTY. WE WILL FIGURE OUT HOW MUCH IT IS FOR LATER.

But strangely, when this lien arises on January 1, the amount of taxes secured by the lien is unknown. And it continues to remain unknown for ten months. The process of determining the amount of tax secured begins every April with appraisal districts notifying property owners as to how much their property was worth on Tax Lien Day. The tax becomes choate when the cities, counties, school districts, and special districts apply their tax rates to the value set by the appraisal district and send out their tax bills in October. Paying your taxes promptly after receiving the bill ensures your property remains free of tax liens—at least for a few days until January 1 comes around again.

DO I TAKE YOUR MONEY, OR DO I TAKE YOUR PROPERTY?

This structure exists to prevent tax evasion. Owners of property on January 1 are personally liable for the payment of the tax (they have “in personam” liability) and remain personally liable even if they sell their property after January 1. Buyers after January 1 are not off the hook. They take title subject to the existing tax lien (they have “in rem” liability) and can lose title to the property through a Sheriff’s foreclosure. But they do not have in personam liability for payment of the tax. Owners of property which has not sold have both in personam and in rem liability. By contrast, the government has options to collect unpaid taxes either by suing a delinquent taxpayer personally, or for the property itself.

BUT I TOOK CARE OF THE TAXES AT CLOSING WHEN I SOLD THE PROPERTY.

When real estate is sold, property taxes are usually divided between the buyer and seller according to the period of time each one has of ownership during that year. If a contract is silent, the seller owes the taxes in full. Contractual prorations never affect the government’s ability to collect its taxes, nor do they affect from whom it can collect. Issues arise when credits are given against the purchase price by the seller for its share of the prorated taxes, with the buyer agreeing to assume responsibility for payment of the taxes. If the buyer fails to pay the taxes, the government will sue both the buyer and the seller, and the parties can sue each other to resolve their contractual obligations. The seller risks a delinquent tax judgment being collected from its non-exempt assets. The buyer risks losing title to the property it just bought. Escrowing taxes, always a good idea if available, can help, but if a value has not yet been established by the appraisal district, even an escrow can provide inadequate protection.

PERSONAL PROPERTY TAX LIENS AND THE DANGERS OF BUYING BUSINESSES AND INVENTORIES.

Owners of taxable business personal property also have the same exposure and can have personal money judgments or orders of foreclosure of their property taken against them if they do not pay their taxes. Purchasers of businesses or business property are responsible for paying any delinquent taxes if they fail to withhold from the purchase money a sum sufficient to pay the same. Fortunately, buyers of retail products, such as retail store shoppers, are buyers “in the ordinary course of business.” No in personam or in rem liability attaches to them.

TAX WARRANTS AND TAX SEIZURES!

Who knew that the evil Sheriff of Nottingham in the Robin Hood stories was seizing property from people who did not pay their property taxes? Even today, the government has the right to forego judicial proceedings and seize real and personal property. Depending on the circumstances, the taxes do not have to be delinquent for a seizure to occur. The Property Tax Code only devotes a few paragraphs to discussing the issuance and execution of tax warrants. Service of tax warrants and seizures happen without notice. The Property Tax Code is silent as to any rights taxpayers might have. Few experiences rival the panic of a client having the sheriff show up at their business, threatening to immediately confiscate their property unless their delinquent tax bill is paid in full on the spot. Tax seizures can be harsh and immediate. And Robin Hood is not around.