What Title Companies Need to Know from the Tax Certificate

In Colorado’s evolving property landscape, title professionals are on the front lines of ensuring clean transfers and accurate disclosures. One of the most critical—but often overlooked—elements in this process is the property tax lien. Understanding how these liens are documented in the Tax Lien Certificate of Purchase is essential for protecting your clients and your company.

Understanding the Lien Landscape

In Colorado, unpaid property taxes automatically become a first-position lien on January 1 of the tax year. If not paid, the county may auction the lien to investors, who receive a Tax Lien Certificate. This certificate is not a deed, but it represents a legal claim that can eventually lead to ownership if the lien is not redeemed within three years.

For title companies, this means that any outstanding tax lien must be identified and resolved before issuing a clean title policy.

What the Tax Certificate Reveals

The Tax Lien Certificate of Purchase is a key document in your due diligence process. It includes:

• Legal description of the encumbered property
• Amount paid by the investor (including any premium)
• Interest rate (statutory, fixed at time of sale)
• Date of sale and certificate number
• Redemption status and potential for treasurer’s deed

This certificate is often recorded or referenced in county records, and its presence should trigger a deeper investigation during the title search.

2025 Legislative Updates: Key Impacts for Title Work

Recent changes in Colorado law have introduced new complexities:

🔹 Deferred Tax Liens

Homeowners can now defer taxes if their bill increases exceed 4% over two years. These deferred amounts do not appear as delinquent, but they still constitute a lien. Title companies must verify whether any deferrals exist, especially in senior or low-income homeowner transactions.

🔹 Temporary Rate Reductions Expiring

While some tax rates were temporarily lowered, those reductions are phasing out. This can lead to unexpected tax increases and inaccurate escrow projections if not carefully reviewed.

🔹 Premium Bids and Non-Refundable Amounts

Investors may bid above the tax amount (a premium), but this premium is not recoverable and does not accrue interest. If a lien is redeemed, only the base tax and interest are returned. This distinction is important when calculating payoff amounts during closings.

Implications for Title Professionals

✅ Enhanced Title Search Protocols

Ensure your title examiners are trained to identify and interpret tax lien certificates. Look for recorded certificates, redemption statuses, and any pending treasurer’s deed applications.

✅ Clear Communication with Clients

Buyers and lenders may not understand the implications of a tax lien. Provide clear explanations and ensure all liens are resolved or escrowed before closing.

✅ Coordination with County Treasurers

Some counties may not immediately update redemption statuses. Direct communication with treasurer offices can help confirm whether a lien has been redeemed or is still active.

Final Thoughts

For title companies, the tax lien certificate is more than a document—it’s a signal. It tells you that a property has a financial obligation that could jeopardize ownership rights. By decoding this certificate and staying current with Colorado’s tax lien laws, you protect your clients, your underwriters, and your reputation.