About Tax Certificates

Every year, municipalities throughout the U.S. auction off their accounts receivable — monies owed by individual property owners — in the form of real estate Tax Lien Certificates.

Tax Lien Certificates are liens secured against property (real estate) for non-payment of municipal charges. These charges include real estate taxes and water and sewer charges owed to the municipality.

Property tax revenue funds essential public services — schools, police, fire, and other municipal operations. When a municipality is unable to collect these taxes, its ability to provide these services to its residents is jeopardized.

In exchange for immediate liquidity on their past-due receivables, municipalities grant Certificate purchasers defined rights of collection and income. The Certificate entitles the investor to all delinquency charges, penalties, and interest.

Typically, a Certificate represents a small fraction of the underlying property's assessed value — often in the low single-digit percentages — providing substantial collateral coverage relative to the amount owed.

Depending on the jurisdiction, after two or three years the Certificate holder is entitled to have the issuing government agency auction the underlying property to satisfy the total amount owed under the Certificate.

Tax Lien Certificates carry a priority of repayment above almost every other lien — including mortgages, home equity lines, construction liens, and HOA claims — subordinate only to a federal tax lien.

Because Certificates are secured by real property and hold priority over most other claims, the substantial majority redeem — with the investor receiving principal plus statutory interest — well before any property auction becomes necessary.