Chapter 15 Flashcards
What is a security?
What is it also known as?
Whenever someone borrows money, the lender generally requires security (or collateral) for the loan.
What is a collateral?
What is it also known as?
Whenever someone borrows money, the lender generally requires security (or collateral) for the loan.
What is a Lien?
A lien is a charge or claim against a person’s property, made to enforce the payment of money.
Security is something of…
Security is something of value the lender can take if the payment terms of the loan are not fulfilled.
When the security for a loan is real estate, the security is called a…
lien
Liens can also be enforced against a property by a __________ agency to recover taxes
Liens can also be enforced against a property by a government agency to recover taxes owed by the property owner (tax liens).
A lien can be used to compel the payment of an ______ or ____ _____
assessment or special charge
A mechanic’s lien is imposed to recover…
payment for work performed on a property, services rendered, or debts incurred.
If a lien is not paid in the prescribed time frame, the lien holder may execute on the lien which…
which can force the property to be sold to pay the lien.
Is the lien actual ownership of the property?
A lien represents only an interest in ownership but is not an actual ownership of the property.
A lien is an encumbrance on …
the owner’s title to the property.
Because an encumbrance attaches to the property, it transfers or conveys with it when the ownership interest is transferred.
Generally, a lien holder must initiate a court action to..
to force the sale of the property or acquire title.
If the property is sold to satisfy a lien holder’s debt,…
the debt is paid from the sale proceeds.
Types of liens and how they are remembered:
VISE 1. Voluntary Lien 2. Involuntary Lien A. Statutory Lien B. Equitable Lien
Voluntary Lien:
Created intentionally by the property owner’s action such as an owner obtaining a mortgage.
Involuntary Lien:
An involuntary lien is not created by choice. Instead it is created by law and is of the following types:
- Statutory
- Equitable
Types of involuntary liens:
- Statutory
2. Equitable
Statutory Lien:
A statutory lien, such as a real estate tax lien, is an involuntary lien created by statute without any action by the property owner.
Equitable Lien:
An equitable lien is created by a court out of fairness. A court ordered judgment to pay a delinquent balance on a charge account would be an involuntary, equitable lien on the debtor’s real estate.
What is VISE?
- Voluntary Lien
- Involuntary Lien
A. Statutory Lien
B. Equitable Lien
Liens may be classified according to the type of property involved:
- General Lien
- Specific Lien
A. Vendor’s Lien
B. Mechanic’s Lien
C. Mortgage Lien
D. Real Estate Tax Lien
General Lien:
A general lien affects all real and personal property of the debtor. This type of lien includes: 1. Judgments 2. Estate and inheritance taxes 3. Decedent’s debts 4. Corporate franchise taxes 5. Internal Revenue Service Taxes
When does a lien attatch to real property?
A lien attaches to real property at the moment it is filed and recorded.
When does a lien not attatch to personal property?
A lien does not attach to personal property until the personal property is seized.
Specific Lien:
Specific liens are secured by a specific property and only affect that property.
This type of lien includes:
1. Vendor’s liens
2. Mechanic’s liens
3. Mortgage liens
4. Real estate tax liens
5. Liens for special assessments and utilities
Specific liens can also secure personal property such as a car when it is financed to ensure repayment of the loan.
A specific lien can also secure personal property such as a ____ when it is financed to ensure repayment of loan
car
Effects of Liens on Title:
The existence of a lien does not necessarily prevent…
the property being conveyed to someone else
Effects of Liens on Title:
Once properly established, a lien runs with the…
land and will bind successive owners until the lien is paid and cleared.
Effects of Liens on Title:
A lien may reduce the value of real estate because…
few buyers will be willing to take a risk on a property with a lien.
Effects of Liens on Title:
Given the lien attaches to the property and not the owner…
the new owner risks losing the property if the creditor takes a court action on the lien.
Priority of Liens:
The priority of liens is the order in which..
claims against the property will be paid or satisfied.
Priority of Liens:
The general rule is,
first to record, first in right (priority).
Priority of Liens:
The priority of payment is..
The priority of payment is from the date the liens are recorded in the public records of the county in which the property is located.
Priority of Liens:
State law may vary the priority or ___
State law may vary the priority or lien repayment.
Priority of Liens:
Exceptions:
Real estate taxes and special assessments generally take priority of all other liens regardless of..
regardless of the order in which the liens are recorded
Outstanding real estate property taxes and special assessments are paid…
special assessments are paid from the proceeds of a court ordered sale first.
The remaining liens are paid in the order in..
which they are recorded or the order of their priority.
Written agreements between lien holders to change the…
change the priority of mortgage, judgment and other liens.
Under a subordination agreement, a superior lien holder agrees to permit a junior lien holder’s interest to move ahead of the
superior lien holder.
Vendor’s Lien:
A lien belonging to a vendor (or seller of a property) for the unpaid purchase property where the vendor has not taken another lien or security for the property.
Real Estate Tax Liens
States, counties, and localities have the right to levy taxes on real estate.
Real estate taxes have priority over previously recorded liens.
There are two types of real estate taxes:
Ad valorem taxes
Special assessment or improvement taxes
General Real Estate Taxes:
Also called ad valorem taxes
Ad valorem taxes are based on the value of the property being taxed.
Ad valorem taxes are specific, involuntary, statutory liens levied by any of the following:
- States
- Counties
- Cities, towns, boroughs and villages
- School districts
- Drainage districts
- Water districts
- Sanitary districts
- Parks, forest preserves, & recreation districts
Exemptions from General Real Estate Taxes:
State laws exempt many types of property from ad valorem taxes if
the properties are being used for tax-exempt purposes as defined by the state’s statutes.
Ad valorem taxes are specific, involuntary, statutory liens levied by any of the following:
- States
- Counties
- Cities, towns, boroughs and villages
- School districts
- Drainage districts
- Water districts
- Sanitary districts
- Parks, forest preserves, & recreation districts
There are two types of real estate taxes:
Ad valorem taxes
Special assessment or improvement taxes
Real estate taxes have priority over
previously recorded liens
Ad valorem taxes are
specific, involuntary, statutory liens levied by… 1-8
Assessment:
Assessment is the official process by
Assessment is the official process by county government to value real estate for taxing purposes.
A property’s assessed value is generally based on
the sales prices of comparable properties.
State laws determine how frequently property is
assessed.
If a property owner fees an error was made in assessing the value of their property, they may
follow an appeals process to have their property re-valued.
The Taxing Process in Colorado
A tax rate in Colorado is expressed in mills which are 1/1,000 of a dollar or $.001
Property taxes in Colorado are due on April 30 if being paid in one payment.
If property taxes are being paid in two payments, these payments are due the last day of February and June 15.
Since property taxes are lienable, the title company must ensure that taxes are current in order to deliver clear title.
Enforcement of Tax Liens:
Real estate taxes that have been delinquent for a statutory period can be collected through a
tax sale
Delinquent taxpayers may pay the property taxes..
any time prior to the tax sale.
The taxpayer exercises this equitable right of redemption
by paying the delinquent taxes, interest and any other fees such as court costs or attorney fees.
In states that permit redemption, the bidding at a tax sale is based on the…..
interest rate the defaulted taxpayer would have to pay to redeem the property ie. The person who bids the lowest redemption interest rate (the most beneficial to the taxpayer) becomes the successful bidder.
The purchaser at the tax sale must pay the amount of the delinquent tax and fees in cash to receive a
certificate of sale which will give the purchaser the right to take possession of the property if the taxpayer does not redeem.
A redemption period after the tax sale allows the taxpayer to redeem the property by paying the amount
collected at the tax sale plus interest and charges (including new taxes levied). This is known as the statutory right of redemption
the statutory right of redemption is also known as
A redemption period after the tax sale allows the taxpayer to redeem the property by paying the amount collected at the tax sale plus interest and charges (including new taxes levied).
The deed that is delivered to the purchaser if the taxpayer does not redeem is a..
tax deed or a sheriff’s deed.
Special Assessments:
Special assessments are always ____ and ____, but they can be either ______ or ______.
Special assessments are always specific and statutory, but they can be either involuntary or voluntary liens.
Special assessments are taxes…
levied on real estate to fund public improvements to the property
Owners in specific neighborhoods that directly benefit from the improvements are required to..
pay the assessments.
In Colorado, these assessments for large and small projects are called…
projects are called special taxing districts and sellers are required to disclose to buyers their existence and all other information.
Mortgage liens or deed of trust liens is a
voluntary lien on real estate given to a lender by a borrower as security for a real estate loan.
Mortgage liens or deed of trust liens becomes a lien when…
It becomes a lien when the mortgage or deed of trust is recorded in the county where the property is located.
Mechanic’s Liens:
A mechanic’s lien is a specific, involuntary lien that gives security to persons or companies that perform labor or materials to improve real property.
A mechanic’s lien is available to..
A mechanic’s lien is available to contractors subcontractors, architects, equipment lessors, surveyors, laborers and other service providers.
A mechanic’s lien is filed when…
the property owner has not fully paid for work completed.
To file a mechanic’s lien, the service provider or contractor…
must file a notice of lien in the public record of the county where the property is located within a certain time after the work is completed.
The period to file a mechanic’s lien in Colorado is within..
2 months after the completion of work unless the contractor files an extension.
The individual or company wanting to file a mechanic’s lien in Colorado must file and provide notice to the debtor…
10 days prior to filing the lien of the intent to file the mechanic’s lient.
In Colorado, the lien holder must initiate the foreclosure process within… or else it will expire
process within 6 months or the lien will expire.
The priority of a mechanic’s lien may be established as of:
- The date the construction began or materials were first furnished
- The date the work was completed
- The date the individual subcontractor’s work was either commenced or completed
- The date the contract was signed
A money judgment is a decree issued by a court that
establishes the amount a debtor owes and provides for money to be awarded.
Judgments most often result from damages caused to
one person by another person through wrongful act
A judgment is a general, involuntary, equitable lien on both real and personal property owned by the
debtor.
To enforce a judgment, the creditor must obtain a writ of execution from the court which directs the sheriff to seize and sell as much of the debtor’s property as is necessary to pay the
debt and the expenses of the sale.
A judgment does not become a lien against the personal property of a debtor until
the creditor orders the sheriff to levy on the property and the levy is actually made.
A judgment lien’s priority is established by one or a combination of the following:
- Date the judgment was entered by the court
- Date the judgment was filed in the recorder’s office
- Date a writ of execution was issued
After real property is sold to satisfy a debt, the debtor should obtain a..
a satisfaction of judgment or a deed of reconveyance, depending on state law, and record the document with the county recorder’s office to clear the lien.
Lis Pendens:
A lis pendens is a notice of a possible future liens that is recorded against a parcel of real estate to provide notice that a law suit has been filed that could affect the title to real estate.
The lis pendens provides notice to potential
purchasers that there is a potential claim against the property.
A lis pendens establishes priority for the later lien. The lien is backdated to..
the recording date of the lis pendens.
A writ of attachment is an
involuntary specific lien that is filed and recorded against real estate
A writ of attachment is a court order against the property of another person that directs the
sheriff or other officer of the court to seize or take control of a property.
An attachment is done in order to prevent a debtor from..
conveying title to such previously unsecured real estate while a court suit is being decided, a creditor may seek a writ of attachment.
Under the writ of attachment, the court retains custody of the
property until the suit concludes.
Most attachments arise from an action for payment of an
unsecured debt.
The lien priority may date to the filing
of the lawsuit or to the filing of the judgment.
Since the creditor may no be awarded a judgment, the creditor must post a surety bond or deposit with the credit which is used to
reimburse the debtor if the creditor is not awarded a judgment.
Other Liens on Real Estate:
Estate and Inheritance Tax Liens Liens for Municipal Utilities Bail Bond Lien Corporation Franchise Tax Lien IRS Tax Lien
As a licensee, it is important to discover any liens against a..
seller as soon as possible before a contract to sell a property is signed.
Licensees should contact a title company prior to listing a property for sale and order an _______ and _________ Report (_ & _) which will notify the licensee of any liens recorded against the property.
Licensees should contact a title company prior to listing a property for sale and order an Ownership and Encumbrances Report (O & E) which will notify the licensee of any liens recorded against the property.
The licensee should discuss any non mortgage liens with the seller in order to more accurately calculate an
estimated seller’s net proceeds for the seller.
The licensee should also determine from the seller if any liens discovered on the O&E have been satisfied so that efforts can begin immediately to have satisfied
liens released prior to a contract of sale being signed.
