Site Tools
Welcome to the State of California

4230-4234 Recurring Transactions: Sale of Tax-Defaulted Property

4230. COMPLETE SALE
If all of the property covered by an abstract is sold at public auction or to a public agency, the appropriate information relating to the sale should be recorded and the abstract transferred to the inactive file (M-4402).

4231. SALE OF A PORTION OF A PROPERTY
If only a portion of a property is sold, two new abstracts may be prepared.

The original abstract and the abstract pertaining to the portion sold may be posted with the date of sale and the reference number, and transferred to the inactive file (M-4402).

The abstract pertaining to the remaining property may be cross-referenced to the original abstract and retained in the active file.

4232. DEEDED SUBJECT TO RESALE
If property is deeded to any agency and is subject to resale by the agency (M-8334), the abstract should be marked, "Deeded to ______________"; following resale by the agency, it should be marked, "Resold by __________ to ________________." The county's records are not cleared until the property has been sold to a private purchaser.

For proper control, either the abstract or a reference abstract in the active file should be retained until the property is sold by the agency.

4233. ACQUISITION BY PUBLIC ENTITIES
For properties acquired by a tax-exempt agency (as defined in Rev. & Tax. Code §5081) under eminent domain proceedings or by negotiated purchase, applicable taxes to the date of the change in ownership are to be transferred to the unsecured roll (Rev. & Tax. Code §5090) and all taxes after the date of purchase canceled (Rev. & Tax. Code §5082).

4234. FORECLOSURE BY PUBLIC ENTITIES
When a property is acquired by a tax-exempt agency through foreclosure of its lien against real property, the taxes are not to be transferred to the unsecured roll and the taxes on the abstract are not to be canceled.

1) If a taxing agency forecloses its lien for real property taxes, resulting in a tax deed being issued to the taxing agency, a parity of title is created with the county's tax lien that was created as a result of the tax default (Rev. & Tax. Code §3713). The property is no longer taxable after the tax deed issues to the agency, but the county's lien for property taxes remains in effect against the property. Therefore, the abstract may not be removed.

2) If a federal agency forecloses on tax liens and/or deeds of trust the property may or may not be taxable from the point of acquisition, but in all cases the abstract cannot be transferred to the unsecured roll as in a negotiated purchase. The tax liens and/or deeds of trusts that are being foreclosed upon are subordinate to the county's lien for real property taxes.

According to federal law (Title 15, U.S. Code, Ch. 14a, §646, and Int. Rev. Code §6323(b)), liens held by the Small Business Administration (SBA) and the Internal Revenue Service (IRS) are subordinate to the county tax lien.

The priority of the county's tax lien, pursuant to Revenue and Taxation Code section 2192.1, survives foreclosure by the SBA and the IRS and can be enforced against the property after it is acquired by the SBA or the IRS (see United States v. California-Plywood, 527 Fed. Rptr. 2d 687 (1975); Garcia v. County of Santa Clara, 1st Appellate District, Court of Appeal (December 1978)).

3) In the case of a state, a county, a city or another agency foreclosing on judgment-type tax liens (certificate of lien, summary judgment, state tax lien, etc.) and/or a deed of trust, the property becomes tax-exempt as of the date of acquisition, but the taxing agency remains subject to the county's lien for real property taxes.

4) The abstract in this case would not be canceled or transferred to the unsecured roll, since the agency has acquired the property subject to the lien for real property taxes.