Chapter 3: Encumbrances on Real Property

Question 1

Encumbrance

Answer 1

A claim, charge, or liability that attaches to and is binding on real estate.

• Anything that affects title to real estate.
• A right or interest held by private party who is not the fee owner of the property.
• May affect the value or obstruct the use of the property.
• does not prevent a transfer of title.
• not all encumbrances are liens

Question 2

LIEN: encumbrance

Answer 2

A charge against property that provides security for a debt or an obligation of the property owner.

• Does not constitute ownership
• May be general or specific

Question 3

Voluntary Lien

Answer 3

contractual or consensual and is created by the debtors actions.

Question 4

Involuntary Lien

Answer 4

created by law such as a tax lien imposed by a municipality.

Question 5

Specific Lien

Answer 5

Secured by a specific parcel of property

• affects only that particular property
• Mortgage Liens
• Deed of Trust Liens
• Real Property Taxes
• Special Assessment Liens
• Mechanics Liens

Question 6

Mortgage or Deed of Trust Lien

Answer 6

• Voluntary Specific Lien on real estate given to lender by borrower as security for a real estate loan.
• becomes a lien on real property when the lender records the mortgage or deed of trust with the register of deeds.
• Most Common form of lien/encumbrance.

Question 7

Real Property Tax & Special Assessment Lien

Answer 7

Unpaid tax becomes a specific involuntary lien on that property.

• Lien attaches to the property on the date the property is listed. (Jan 1st) and as superior lien
• takes priority over all other liens.
• real property is taxed ad valorem : according to value
• Valid for up to ten years.

Question 8

Mechanics Lien

Answer 8

Specific, involuntary lien & is available to contractors, sub contractors, architects, equipment lessors, surveyors, laborers,
*Filed when property owner has not paid for work or when contractor has not paid sub contractors or suppliers.
*must be filed within 120 days after last furnishing the labor or materials.
*lien is in effect from the date that the person first furnished the labor or materials.
Enforcement must happen within 180 days of first furnished labor or materials.

Question 9

General Lien

Answer 9

Affect all the property of the debtor

• real or personal
• judgements
• personal property tax lien
• state and federal tax liens

Question 10

Judgements

Answer 10

decree issued by a court

Question 11

Money Judgement

Answer 11

When the decree provides for the awarding of money and sets forth the amount of money owed by the debtor to the creditor.

• becomes an involuntary general lien when properly docketed in the county.
• good for ten years from the date of the judgement

Question 12

Personal Property Tax Liens

Answer 12

• Have priority over other types of liens
• assessed on certain types of personal property
• if unpaid, becomes a general, involuntary lien against ALL property owned by the taxpayer.

Question 13

State Tax Liens

Answer 13

• General involuntary Lien from :
  Unpaid state inheritance Taxes
  Unpaid State Income Taxes
• last for ten years

Question 14

Federal Tax Liens

Answer 14

from IRS
General Involuntary lien on all real and person property owned by tax payer
*priority based on date of filing/recording
*Does NOT supersede previously recorded liens.

Question 15

Effects of Liens on Title

Answer 15

*Run with the land:
Binds successive owners if steps are not taken to clear the liens
*Reduces the fee simple estate value
* Attach to property NOT property owner

Question 16

Pure Race System: Liens

Answer 16

first lien to be filed is first to be paid

*After real estate taxes, personal property taxes, and special assessments are paid.

Question 17

Deed Restrictions

Answer 17

Covenants, Conditions, and Restrictions
CC&R’s
* Private agreements placed in public record that affect the use of the land.

Question 18

Lis Pendens

Answer 18

Litigation Pending filing

• anyone acquiring an interest in property takes that interest subject to any judgement or decree the court may issue.
• NOT on a lien
• Notice of action or lawsuit pending
• encumbrance against the title

Question 19

Writ of Attachment

Answer 19

• For debt other than mortgage

* ensures unsecured real estate remain available until law suit is decided.

Question 20

Writ of Execution

Answer 20

• follows a decision on writ of attachment.

* directs county sheriff to sell property to satisfy judgement

Question 21

Easements

Answer 21

Nonposessory right to use the land of another for a particular purpose.
NOT a form of ownership
1) easement appurtenant
2) easement in gross

Question 22

Easement Appurtenant

Answer 22

easement that is annexed to the ownership of one parcel of land and used for the benefit of another parcel of land.

• two adjacent tracts of land must be owned by different parties
• passes with the title.

Question 23

Servient Tenement

Answer 23

tract over which the easement appurtenant runs

Question 24

Dominant Tenement

Answer 24

Tract that benefits from the easement

Question 25

Easement in Gross

Answer 25

Personal interest in or right to use the land of another. * Benefits person or entity * Not a parcel of property so no dominant estate. * May be indefinite * May be assigned or conveyed. * In NC is a personal right and irrevocable during owners life, usually are NOT assignable, and terminates on death of personal easement owner. * Must be recorded to be enforceable.

Question 26

Possessory Interest in Land

Answer 26

Owner of land burdened by easement can possess and use land but cannot interfere with easement holders rights.

Question 27

Express Grant : Easement

Answer 27

written agreement between parties establishing the easement right. *NC Statute of Frauds states must be in writing as they are an interest in real property

Question 28

Express Reservation: Easement

Answer 28

created by the grantor in a deed of conveyance by reserving and easement over the sold land.

Question 29

Necessity: Easement

Answer 29

Implication of Law | Owners cannot be landlocked and must have rights of ingress and egress.

Question 30

Prescription: Easement

Answer 30

NC: 20 years * when a claimant has made use of another's land for a certain period of time as defined by state law. *claimants use must have been Continuous exclusive without the owners approval visible open notorious: owner could have learned of it. Can be prevented if owner gives permission to user.

Question 31

Condemnation: Easement

Answer 31

Acquired for a public purpose through the power of eminent domain.

Question 32

Eminent Domain

Answer 32

Power of government or quasi government to take property for public use, after paying the owner just compensation.

Question 33

Easement Termination

Answer 33

1) when purpose for which created no longer exists 2) easement holder becomes owner of land: merger 3) release of the right of easement to the owner of the servient tenement. 4) abandonment of the easement 5) non use of prescriptive easement 6) adverse possession of owner of the servient tenement. 7) destruction of servient tenement 8) nonrecordation 9) lawsuit 10) excessive use

Question 34

Licenses

Answer 34

personal non transferable privilege to enter the land of another for specific purpose. * can be terminated or revoked * NOT an encumbrance * ends with death of either party or sale of land.

Question 35

Encroachments

Answer 35

improvement or portion of improvement such as a building, a fence, or a driveway illegally extends beyond the land of its owner and covers some land of an adjoining owner, street, or an alley. *legal effect is to make both titles unmarketable.

Question 36

General Tax / Ad Valorem Tax

Answer 36

in NC governed by Machinery Act

Question 37

Machinery Act

Answer 37

* regulates 1) standards for real property taxation, 2) standards for tax assessment, 3) standards for tax appraisal, 4) requirements for tax exempt status * Mandates that assessed value is 100 % of market value.

Question 38

Assessment

Answer 38

Official valuation process to determine real estate value.

Question 39

Appropriation

Answer 39

The way a taxing body authorizes the expenditure of funds and provides for sources of funding