Chapter 3: Encumbrances on Real Property Flashcards
Encumbrance
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
LIEN: encumbrance
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
Voluntary Lien
contractual or consensual and is created by the debtors actions.
Involuntary Lien
created by law such as a tax lien imposed by a municipality.
Specific Lien
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
Mortgage or Deed of Trust Lien
- 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.
Real Property Tax & Special Assessment Lien
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.
Mechanics Lien
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.
General Lien
Affect all the property of the debtor
- real or personal
- judgements
- personal property tax lien
- state and federal tax liens
Judgements
decree issued by a court
Money Judgement
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
Personal Property Tax Liens
- 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.
State Tax Liens
- General involuntary Lien from :
Unpaid state inheritance Taxes
Unpaid State Income Taxes - last for ten years
Federal Tax Liens
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.
Effects of Liens on Title
*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
Pure Race System: Liens
first lien to be filed is first to be paid
*After real estate taxes, personal property taxes, and special assessments are paid.
Deed Restrictions
Covenants, Conditions, and Restrictions
CC&R’s
* Private agreements placed in public record that affect the use of the land.
Lis Pendens
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
Writ of Attachment
- For debt other than mortgage
* ensures unsecured real estate remain available until law suit is decided.
Writ of Execution
- follows a decision on writ of attachment.
* directs county sheriff to sell property to satisfy judgement
Easements
Nonposessory right to use the land of another for a particular purpose.
NOT a form of ownership
1) easement appurtenant
2) easement in gross
Easement Appurtenant
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.
Servient Tenement
tract over which the easement appurtenant runs
Dominant Tenement
Tract that benefits from the easement
Easement in Gross
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.
Possessory Interest in Land
Owner of land burdened by easement can possess and use land but cannot interfere with easement holders rights.
Express Grant : Easement
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
Express Reservation: Easement
created by the grantor in a deed of conveyance by reserving and easement over the sold land.
Necessity: Easement
Implication of Law
Owners cannot be landlocked and must have rights of ingress and egress.
Prescription: Easement
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.
Condemnation: Easement
Acquired for a public purpose through the power of eminent domain.
Eminent Domain
Power of government or quasi government to take property for public use, after paying the owner just compensation.
Easement Termination
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
Licenses
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.
Encroachments
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.
General Tax / Ad Valorem Tax
in NC governed by Machinery Act
Machinery Act
- 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.
Assessment
Official valuation process to determine real estate value.
Appropriation
The way a taxing body authorizes the expenditure of funds and provides for sources of funding
