Do IRS Liens Have Priority Over Mortgages?

If a taxpayer fails to pay overdue taxes, the IRS has the right to place a lien on the taxpayer's real property. An IRS lien is the federal government's legal claim against the taxpayer's property to secure payment of the tax debt. Upon sale or foreclosure of the home, who gets paid first - the mortgage or the IRS?

The answer depends on the "priority" of the lien. If the IRS files a lien on property that already has an existing mortgage, the mortgage has priority over the IRS lien. Upon sale or foreclosure of the home, the proceeds would first be used to pay the mortgage, and if there is enough left over, the IRS would be paid next. If the IRS files a lien on property that has an existing first and second mortgage, the IRS lien would be third in priority and wouldn't be paid until after the two mortgages are fully repaid.

On the other hand, if the IRS files a lien on property that is owned free and clear of any mortgages, the IRS lien will have priority over any subsequent mortgages that the homeowner obtains. In reality this situation is unlikely to occur since most mortgage lenders would not be willing to provide a loan on property that has a pre-existing tax lien.

The Holdover Tenant - What are the Landlord's Options?

A holdover tenant is a tenant who stays on the property after the expiration of the lease. A landlord with a holdover tenant generally has two choices of action:

● Option #1: Eviction. The landlord may seek to evict the holdover tenant.

● Option #2: Creation of a new periodic tenancy. The landlord may allow the tenant to stay and continue to accept rent from the tenant, creating a new periodic tenancy (usually a month-to-month tenancy).

Landlords are bound by the option they choose. For example, a landlord who continues to accept rent from the tenant may no longer seek to evict that tenant on the basis of the holdover.

Note that the written lease may override the landlord's choice. If the lease states that a tenant who stays on the premises after the lease term is automatically converted to a month-to-month tenant, the written lease has selected Option #2 for the landlord. In that case, the landlord cannot seek to evict the tenant on the grounds of holdover.

THREE TYPES OF DEEDS

Upon transfer of land, the seller may execute and deliver to the buyer one of the following types of deeds:

● General Warranty Deed: This deed provides the greatest amount of protection. This deed includes a warranty against title defects or encumbrances that have been caused by either the seller or by prior owners of the property. In other words, the seller warrants against any chain of title problems, even if they were not caused by the seller.

● Special Warranty Deed: This deed provides a lesser amount of protection. This deed also includes a warranty against title defects or encumbrances, but only those that have arisen during the time the seller owned of the property. The seller does not make any warranties as to whether problems in the chain of title arose under prior owners of the property.

● Quitclaim Deed: This deed provides the least amount of protection. It contains no warranties and is essentially an “as-is” deed.