Chapter 11 Flashcards
Mater
Lien
a charge or claim against property that is made to enforce the payment of money. When the lender’s security is in the form of real estate, the security is called lien.
Lien is a right to retain possession of another’s property pending discharge of a debt
security
also called collateral; a lender requires something of value that the borrower promises to give him/her if failing to repay the debt.
Collateral: money or property which is used as a guarantee that someone will repay a loan
encumbrance
an charge or claim that attaches to real property and lessens its value or impairs its use. It transfers along with real property.
voluntary lien
be created intentionally by the property owner’s action (e.g. take out a mortgage loan.)
involuntary lien
be created by a court or law.
statutory lien
be created by statute. (a real estate tax lien)
equitable lien
be created by a court to ensure the payment of a judgment as well as by agreement.
(Something that is equitable is fair and reasonable in a way that gives equal treatment to everyone. relating to or valid in equity, as distinct from common law or statute law)
general lien
affects all the real estate and personal property of debtor, including judgements, estate and inheritance taxes, decedent’s debts, corporate franchise taxes, and Internal Revenue Service taxes.
real estate lien
attaches to real property at the moment it is filed
lien on personal property
does not attach to personal property until the personal property actually is levied on or seized by the sheriff.
specific lien
be secured by specific property and affect only that particular property, including mechanics’ liens, mortgage liens, real estate tax liens, and liens for special assessments and utilities.
a title search
before closing a real estate transaction by buyers to reveal any recorded liens
priority of liens rules
- the first to record, the first in right
- the date they are recorded in the public records of the county in which the property is located
- REAL ESTATE TAX always the first and then Special Assessments
subordination agreements
permission/agreement thhe priority change of liens
real estate taxes
- general real estate taxes
2. special assessment
general real estate taxes
also called ad valorem taxes based on the value of the property being taxed.
They are specific, involuntary, and statutory liens..
real estate taxes
a favored source of revenue for local governments
exemptions of real estate taxes
- municipal organizations, such as schools, parks, and playgrounds
- cities and counties
- state and federal governments
religious and charitable organizations - hospitals
- educational institutions
exemptions of real estate taxes in Illinois
schools, religious institutions, cemeteries, charitable institutions…..
homesteads exemptions in Illinois
- single-family homes…$ 6,000 (7,000 on Cook county)
- senior citizen who is over the age of 65 ($ 5,000)
- senior citizen who is over the age of 65 (house income does not exceed @ 55,000)
- Improvements of houses (up to $ 75,000)
Calculating real estate taxes
assess value (1/3 market value) x equalization factor (may raise or lower assessment) - exemptions x tax rate = annual tax
equalization factor
assessed values compares with selling prices
tax rate
proposed expense (tax district/area) / total assessed property values
appropriation
the way a taxing body actually authorizes the expenditure of funds and provides for the sources of the finding
tas levy
a formal action taken to impose the tax, usually by way of a vote of the taxing district’s governing body
comibined tax bill
after appropriation, a property owner’s tax bill is computed by applying the tax rate to the assessed valuation of the property
In Illinois, the county collector prepares and issues only one combined tax bill to each parcel of property
Illinois General real estate taxes
- are levied annually for the calendar year
- becomes a prior first lien on January 2 of that tax year
- are not due and payable until the following year
- two installment: one-half by June 1; September 1
- paid in arrears
- payment due date also called penalty date (1.5% per month added to any unpaid amount
- bills should be issued 30 days before penalty
dates - Cook county (1st installment is March 1)
delinquent borrower or taxpayer
someone who fails to pay their debts or taxes
enforcement of tax liens
- real estate taxes must be valid to be enforceable
2. has remained delinquent for the statutory period can be collected through a tax sale
annual sale
the taxes are not paid by the second installment, the county collector can enforce the tax lien and request. However, the court order allows only the sale of the tax lien, not the property itself.
forfeiture sale
If there are no bids on a property at the annual tax sale the property is forfeited (forced or given up) to the state; although title does not really change. The owner may redeem the property
scavenger sale
If the taxes have not been paid on a property for 2 years or more, the property may be sold at a scavenger sale. (a person who collects things discarded by others))
special assessment
- also called improvement taxes (e.g., installation of paved streets, curbs. gutters, sidewalks, storm sewers, or street lighting)
- special and statute
- involuntary: public agency
- voluntary: owners petition the local government to install a public improvement
- are due in equal annual installment, plus interest, over a period of 5 to 10 years, with the first installment usually due during the year following the public authority’s approval of the assessment.
- The annual due date for assessment payments in Illinois is generally Jan. 2.
mortgage lien
- also called a deed of trust lien
- voluntary lien on real estate given to a lender by a borrower as security for a real estate loan
- activated when the lender records the documents in the county in which the property is located
- a preferred lien, called a first mortgage lien means that no other liens against the property
mechanics’ lien
- involuntary lien
- is filed when the owner has not fully paid for the work or when the general contractor has been compensated but has not paid the subcontractors or material suppliers.
- Releases of lien or lien waivers should be sought by the seller once work paid, with signatures from the general contractor and the subcontractors
- In Illinois, a written notice is given to owner within 10 days after recording a lien against any property of the owner
- In Illinois, the contractor’s lien right will expire two years after completion of that contractor’s work.
- Under the Mechanics Lien Act (770 ILCS 60) a property owner can demand that the suit be commenced in 30 days which can force the sale of the real estate through a court order to provide funds to pay the claimant’s lien.
notice of non-responsibility
owners claims no mechanics’ liens
Judgement
- an order issued by a court that settles and defines the rights and obligations of the parties to a lawsuit.
- a general, involuntary, equitable lien on both real and personal property owned by the debtor
- In Illinois, judgment liens are effective for 7 years,.
money judgement
a court judges and establishes the amount a debtor owes and provides for money to be awarded,and may be renewed for another 7-year term.
writ of execution
directs the sheriff from the court to seize and sell as much of the debtor’s property as is necessary to pay both the debt and the expenses of the sale
lis pendens
- a considerable delay between the time a lawsuit is filed and the time final judgment is rendered
- any suit is filed that affects title to real estate, a special notice called
writ of attachment
the court retains custody of the property intil the suit concludes
Federal estate taxes/ state inheritance taxes
general. statutory, involuntary liens that encumber a deceased person’s real and personal property
liens for municipal utilities
owners who refuse to pay bills for municipal utility services
specific, equitable, involuntary lien
bail bond liens
bail: a permission for an arrested person to be released after bail has been paid
specxific, statutory, voluntary len
corporation franchise tax liens
levy taxes for business promotion/encouragement
federal tax liens
- IRS tax lien
2. general, statutory, involuntary lien on all reall and personal property by the delinquent taxpayer
