As I said, you should try working out a scenario with actual numbers. The lien balance will just never get that large. Prop. 13 limited the tax rate to 1%. S

As I said, you should try working out a scenario with actual numbers. The lien balance will just never get that large. Prop. 13 limited the tax rate to 1%. So to see how much the lien can increase by in a single year, you take 1% of the amount the property value increased, less 2% of the previous year's tax bill. Let's take, by way of example, a scenario where values have been flat (so the payment has been equal to the assessment, so there's no lien yet) and then jump 10% in a year. What happens? Let's say V is the property's value before the 10% jump. The assessment, after the jump, is for 1.1% of V; the tax bill is for 1.02% of V, creating a lien for 0.08% of V. If values plateau again, in the following year, the assessment will again be for 1.1% of V, but the bill will be about 1.04%, adding about 0.06% to the lien. It will take 5 years for the bill to catch up with the assessment, at which point the lien will total about 0.2% of V. 0.2% is just not a scary number; compare it to the 6% that an agent typically charges to sell the property. Even in a crash, it's just not going to make the difference between making it possible or impossible to sell. The only scenario under which the lien value grows to a significant number is the one in which property values go up a lot for a long time (as they have, in the SF Bay area, for the last 20 or 30 years). In that case, it would take a hell of a crash to bring values down to where some properties would be worth less than their liens. A 20% drop wouldn't do it; it would take something more like an 80% crash. An 80% crash is not going to happen. But if it makes you feel better, I would be willing to accept a provision that says that if the amount of the lien at the time the property is sold exceeds 50% of the gain on the sale, the difference is forgiven. (No refund is offered if the property is sold at a loss.)