Texas Tax Code § 32.05: Property Tax Lien Priority and Exceptions

Under Section 32.05 of the Texas Tax Code, a property tax lien outranks almost every other claim against the same property. That is the heart of Texas property tax lien priority: the county’s lien for the current year’s taxes sits ahead of mortgages, deeds of trust, judgment liens, mechanic’s liens, and homeowners’ association assessments, and it does so regardless of when those competing interests were recorded. A mortgage signed a decade ago still falls behind a tax lien that attached last January.¹

When the Lien Attaches

Priority runs from the date the lien attaches, so that date matters. Section 32.01 creates the lien automatically on January 1 of each year to secure that year’s taxes, penalties, and interest. No filing, no notice, and no action by the county is required. The lien is perfected the moment it attaches.²

The lien covers both real property and tangible personal property that is subject to taxation. For personal property such as business inventory, furniture, and commercial equipment, the lien operates in solido: it attaches to all such property the owner holds on January 1 and to anything acquired during that year. The government’s security interest blankets every taxable asset the owner has.²

What the Tax Lien Outranks

Section 32.05(b) states the rule directly. A property tax lien takes priority over the claim of any creditor of the property owner, any other lien on the property, and any future interest or encumbrance against it. That sweep includes mortgages, deeds of trust, mechanic’s liens, and judgment liens. The statute also names liens held by homeowners’ associations, condominium associations, and similar organizations for assessments, dues, fines, or attorney’s fees.¹

Subsection (b-1) closes the door on any first-in-time argument. Priority applies regardless of whether the competing debt, lien, or encumbrance existed before the tax lien attached. A bank holding a mortgage recorded years earlier cannot use its seniority in time to jump ahead of the county. Private contracts between buyers and lenders cannot waive or modify this hierarchy.¹

In a foreclosure or judicial sale, the proceeds go to outstanding property taxes before any money reaches private lenders. The lien secures not just the base tax amount but all penalties and interest that accrue on the delinquent balance. Those additional charges share the same senior status as the original tax bill.²

Subsection (a) adds one more layer that surprises many Texas homeowners. A tax lien on real property takes priority over a homestead interest in the property. Texas homestead protections are strong against most creditors, but property taxes cut through them.¹

The Narrow Exceptions

Section 32.05(c) lists three situations where a property tax lien must step aside. Outside these, the tax lien controls.

The first exception involves estate claims. When a property owner dies, certain probate claims outrank the tax lien. Under the Texas Estates Code, funeral expenses and last-illness expenses, each capped at $15,000, rank as Class 1 claims, ahead of secured tax liens, which fall into Class 3. A family allowance for the surviving spouse and minor children is also paid before all debts except those Class 1 claims.³⁴

The second exception is for restrictive covenants. A restrictive covenant that runs with the land and was recorded before January 1 of the year the tax lien arose keeps its priority. HOA liens for assessments and fees are specifically excluded from this exception, so the general tax-lien priority still beats HOA collection efforts.¹

The third exception covers recorded easements. A valid easement of record filed before January 1 of the year the tax lien arose retains priority. A utility easement or right-of-way recorded years ago survives even after a tax sale.¹

Federal Tax Liens Are Not Covered

Section 32.05 does not address IRS claims. When both a state property tax lien and a federal tax lien exist on the same property, the ranking is decided by federal common law rather than by Section 32.05. The U.S. Supreme Court held in United States v. City of New Britain that when no federal statute expressly confers priority, competing liens are resolved on a first-in-time, first-in-right basis, with each lien’s rank set by when it attached and became perfected.⁵

Because Texas property tax liens attach and perfect automatically on January 1 each year, they often predate a federal tax lien filed later that year. If the IRS perfects its lien first, though, the federal claim can outrank the state’s interest. Lenders and purchasers should check for both state and federal liens, because the outcome depends entirely on timing.

What Priority Means When Property Changes Hands

A property tax lien follows the property, not the person. When title changes, the new owner takes the property subject to every existing tax lien and its full priority. The government’s right to foreclose survives the transfer, and the lien keeps its senior position over any new mortgages the buyer records.

This is the trap that catches uninformed buyers. Purchase a home with three years of unpaid taxes and you inherit those debts. Title companies typically catch this during a search, but private sales, quitclaim transfers, and estate transactions sometimes slip through without one. The lien remains enforceable regardless of whether the buyer knew about it, and the taxing unit can pursue the property even though the original debtor is long gone.⁶

Anyone buying Texas real estate should confirm that all property taxes are current before closing. The cost of a title search is minor compared with discovering a senior lien after the deed is recorded.

Priority in a Tax Foreclosure Sale

A taxing unit can file a foreclosure suit as soon as taxes become delinquent. If the court enters judgment, the property is ordered sold, and the minimum bid must cover the lesser of the judgment amount or the property’s adjudged market value. If no bidder meets that threshold, the taxing unit can terminate the sale or take title itself for the benefit of all taxing units with liens in the suit.⁷

A completed tax sale extinguishes every lien included in the foreclosure judgment. That includes junior mortgages, HOA liens, and judgment liens that had been sitting behind the tax lien. The sale does not, however, wipe out the personal liability of anyone named in that judgment for any portion of the debt that sale proceeds failed to cover.⁷

Property Tax Loans and Transferred Liens

Section 32.06 allows a third party to pay a property owner’s delinquent taxes and receive a transfer of the tax lien. The tax collector issues a receipt and certifies that the taxing unit’s lien has shifted to the new holder. The transferred lien retains the same priority as the original government lien, which is what makes these loans attractive to lenders: they step into the government’s senior position.¹

The statute caps the interest rate a transferee can charge at 18% per year on the amount advanced, which includes the taxes, penalties, recording fees, and reasonable closing costs. The transferee generally cannot foreclose on the lien until one year after recording it, unless the contract with the property owner says otherwise.⁸

For a property owner, the tradeoff is worth thinking through. The delinquent tax debt stops growing at the government’s penalty rate, but the new debt can carry up to 18% annual interest, and the lender holds the same foreclosure power the county had.

1
State of Texas. Texas Tax Code 32.05 – Priority of Tax Liens Over Other Property Interests
2
State of Texas. Texas Tax Code 32.01 – Tax Lien
3
State of Texas. Texas Estates Code 355.102 – Claims Classification Priority of Payment
4
State of Texas. Texas Estates Code 353.104 – Preference of Family Allowance
5
Justia U.S. Supreme Court Center. United States v. City of New Britain
6
Travis County Tax Office. Property Tax Important Dates
7
State of Texas. Texas Tax Code 34.01 – Sale of Property
8
State of Texas. Texas Tax Code 32.06 – Property Tax Loans Transfer of Tax Lien