A lien is a legal interest in an asset that arises when a property owner fails to pay the tax obligations associated with the asset. In the case of real estate, a tax lien is granted to individuals or companies that do not pay property taxes. A landowner or homeowner can usually waive a tax lien property before it expires if they pay off the debt along with all penalties and interest.

Local governments initially imposed property tax liens on taxpayers, including towns, cities, or counties. Although many governments have the right to collect their tax debts, the demand for tax certificates is increasing. Purchasing one of these certificates, usually at a public auction, means that you accept responsibility for paying taxes owed to the public. You are also responsible for collecting this debt from the property owner.

The municipality receives a guaranteed tax return payment by selling tax deposit certificates to third-party investors. Investors willing to take risks are rewarded with interest payments as the property owner pays off the debt over time.