Statutory Lien

A statutory lien is an involuntary lien created automatically by the operation of law when specific statutory criteria are met. Common examples include property tax liens, municipal utility liens, and mechanic’s liens.

Texas-Specific Nuance & Citation

According to Texas Tax Code § 32.01, a property tax lien attaches to all real property on January 1st of each year to secure the payment of all taxes, penalties, and interest. This statutory lien takes legal priority over almost all other liens, including prior mortgages.

The Trap

Many students believe that mortgage liens take precedence over all other debts. On the exam, remember that statutory ad valorem property tax liens in Texas take absolute priority over any mortgage lien, regardless of when the mortgage was recorded.

Worked Example

A home buyer in El Paso has a large mortgage from a commercial bank. The homeowner fails to pay their local property taxes. The local county tax authority places a tax lien on the home. This statutory tax lien is superior to the bank’s mortgage, meaning a tax foreclosure can wipe out the bank’s security interest.