Did a recorded California tax lien remain on real property after the taxpayer quitclaimed it to another person?

Plain-English summary

California legal staff concluded that a state tax lien recorded before a taxpayer quitclaimed real property remained attached after the transfer.

The Board recorded its lien on July 12, 1990 while the tax debtor owned the property. The debtor quitclaimed it on September 25, 1990. Staff said a transferee charged with constructive notice takes encumbered property subject to the lien rather than as a bona fide purchaser.

The letter said the recorded lien complied with applicable constructive-notice requirements and protected California against future purchasers or encumbrancers. It also made clear that the lien did not imply the transferee personally owed the tax.

Common questions

Did the quitclaim remove the lien?

No.

Did the transferee become personally liable for the taxpayer's debt?

No, according to the letter.

What was the lien's purpose after transfer?

To give future purchasers and encumbrancers constructive notice of California's claim against the property.

Citations and references

• California Government Code sections 7170(b) and 7171 — real-property lien priority and recording discussed
• California Government Code section 27281.5(a) — constructive-notice recording requirement quoted
• Federal Deposit Insurance Corp. v. Charlton (1993) 17 Cal.App.4th 1066 — transferee's constructive knowledge cited

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/170-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/170-0055.pdf

Original ruling text

170.0055
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 445-6496
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

April 11, 1995

KATHLEEN CONNELL

Controller, Sacramento
────────

REDACTED TEXT
Re:

BURTON W. OLIVER

Executive Director

REDACTED TEXT
State Tax Lien –REDACTED TEXT
Account No. REDACTED TEXT

Dear REDACTED TEXT:
This office has been asked to respond to your letter dated March 17, 1995 to Dennis Arney of the Board’s San Diego office. You questioned the propriety of the Board’s recordation of Lien No. REDACTED TEXT. On July 12, 1990, the Board recorded a Notice of State Tax Lien in the San Diego County Recorder’s office for a liability incurred by taxpayers REDACTED TEXT (Lien Number REDACTED TEXT). As of the time of recordation, this lien attached to real property owned by REDACTED TEXT at REDACTED TEXT, California. On September 25, 1990, REDACTED TEXT recorded a quitclaim deed transferring this property to REDACTED TEXT, as his separate property. When real property encumbered by a duly recorded lien is transferred, the transferee is charged with constructive knowledge of the encumbrance and takes title to the property subject to the lien, not as a bona fide purchaser (see Federal Deposit Ins. Corp. v. Charlton (1993) 17 Cal.App.4th 1066). Government Code section 7170(b) provides: “A state tax lien is not valid as to real property against the right, title, or interest of any of the following persons where the person’s right, title, or interest was acquired or perfected prior to recording of the notice of state tax lien in the office of the county recorder of the county in which the real property is located pursuant to section 7171: “(1) A successor in interest of the taxpayer without knowledge of the lien ....”

Mr. REDACTED TEXT

-2-

April 11, 1995
170.0055

Lien Number REDACTED TEXT serves to place future potential purchasers or encumberers of the property located at REDACTED TEXT that the Board has a lien on this property. Government Code Section 27281.5(a) provides: “Any restriction imposed upon real property on or after January 1, 1982, which restricts either the ability of the owner of real property to convey the real property or the owner of a proprietary leasehold interest to convey such interest and which is imposed by a municipal or governmental entity on real property or a proprietary leasehold interest which is not owned by the municipal or governmental entity, shall be specifically set forth in a recorded document which particularly describes the real property restricted in order to impart constructive notice of the restriction, or shall be referenced in a recorded document which particularly describes the real property restricted and which refers by page and book number to a separately recorded document in which the restriction is set forth in full.” It is our opinion that Lien Number REDACTED TEXT complies with applicable law and is specifically designed to give constructive notice of the Board’s lien to potential purchasers or encumberers. We do not believe that Lien Number REDACTED TEXT implies that REDACTED TEXT has a personal outstanding tax liability to the Board. However, the Board will cooperate in providing information to potential creditors of Mr. REDACTED TEXT as to whether he owes any tax to the Board. Very truly yours, Thomas Cooke Staff Counsel TJC:plh cc:

Mr. Rick Slater (MIC:55)
San Diego District Administrator (FH)