Chapter 4- Encumbrances Flashcards
Encumbrances
Anything that affects or limits the fee simple title to property. A right or interest in a property held by one who is not the legal owner of the property.
Types of encumbrances
1) Easements
2) Deed Restrictions (Private control)
3) Encroachments
4) Liens
More names for deed restrictions
1) Declaration of restrictions
2) Restrictive Covenants
3) CC&R’s
Easement
Nonpossessory property interest right one person has in land owned by someone else.
Encroachment
Are buildings, fences or other structures that reach beyond the owners property line.
Types of encroachments
1) A trespass-Could be walking on property, tree growing over fence.
2) nuisance- smell or barking dog.
abatement action- lesson the effect- cut back tree or muzzle dog.
Lien
Claim or charge of security for a debt or obligation.
Classification of liens
1) Specific- Mortgage, car loan
2) General- Applies to everything- IRS
Voluntary Liens
- **All specific
1) Mortgages
2) Trust Deed- Deed of trust
3) Carrybacks- Seller becomes lender.
Involuntary liens
1) Property taxes
2) Assessments
3) Attachments
4 Judgments
5) Mechanics liens
6) IRS
7) Decedent Debts
By Property tax first, then IRS, then date of record
Assessments
Governmental taxes
Attachments
Based on a judgement or seizure.
Judgments (lien)
A general lien that becomes specific with attachments.
Mechanics Lien
Hired contractor that did not get paid
IRS
General
Decedent debts
Deceased person is applicable to estate. (General
Types of judgements
Domestic-AZ court
Foreign- Outside AZ
How to record a judgement
File in public record- with constructive notice- recording date takes priority.
Writ of execution with judgement
Have to go back to court to go after.
1) Sheriff
2) Personalty then realty.
Garnishment
Get writ of execution to take out of paycheck
Statute of limitations on judgment
Judgement good for 5 years
Last 90 days can go and renew to get another 5 years.
Laches with judgement
If you did not renew in 5 years the judgement dies.
Priority of judgement
Based on recordation date.
Interest rate with judgement
accrues interest (agreed rate or legal rate) Legal rate: lesser of: 1% or 1% above prime.
Attachment (lien)
Judgement
Types of attachments ( judgements )
1) Writ of Attachment
2) Garnishment
3) LIS PENDENS- Not a Lien
LIS PENDENS
Not a lien
Law suit pending
Order for LIS PENDENS
1) Judgement
2) Writ of attachment
3) Writ of execution
Mechanics lien
1) Written contract with owner
2) beginning of work
3) 20 day preliminary notice
4) record lien- licensed contractor only
5) 120 days to file
6) Priority goes back to the day work began
7) File a lawsuit- Judgement good for 5 years
8) Contractors can sign interest over to someone to take care of
level payments
An amortized mortgage repaid in equal, periodic payments that include principal, and interest.
Installments
Based on principal balance. Payment changes as it is paid off.
Interest only
Term, straight, const. bridge, Interim all mean same thing
Principal payment due as a balloon at the end.
writ of execution
A court order direction the sheriff to seize and sell as much as the defendants property as necessary to satisfy the debt and expenses of the sale.
Budget
1/12 interest
Graduated payments
“GPM”
Every year it goes up.
Has a lower payment in beginning
Negative amortization
Variable interest rates
“ARM”
Adjustable Rate Mortgage
Has a year cap and a lifetime cap
Equity participation
percentage “SAM”
Shared Appreciation Mortgage
Get part of the appreciation
Reverse Mortgage
Give you 50% of equity of home
Do lump sum or monthly instalments
Has to be first loan or lots of equity
Construction
(Interim, Bridge, Swing or Gap) - more names
Interest only
a) Draws- Take money in chunks as needed. Interest starts from draw. Interest only until project complete. Payback immediately. Then do a take out loan.
Types of Repayment Plans
1) Level Payments
2) Installment (not level)
3) Interest only
4) Budget
5) Flexible Payments
6) Variable interest (VRM)
7) Equity participation
8) Open end mortgage
9) Construction Loan
Types of Mortgages and Deeds of Trusts
1) Conventional
2) FHA insured
3) VA guaranteed
4) Chattel Mortgage
5) Package
6) Purchase Money
7) Blanket
8) Open End
9Junior or subordinate
Open End
Revolving line of credit
Conventional- Non-governmental insured
Banks, Savings and loan, Not FHA
20% down
FHA insured
Government insured loan
VA guaranteed
Guaranteed by government. No insurance. Based on benefits.
Chattel
Personal Property is security
Package
Collateral real and personal property.
Purchase money
carrybacks
Blanket
Loan for builder or developer. Multiple parcels of collateral.
Give partial release of lots.
Junior
Comes after- go from senior lien to junior lien.
Personal Property Liens
UCC=Uniform Commercial Code-personal lien-5years
UCC-1 Filed with Secretary of State (government level)
UCC-3 filed to release/terminate- File with secretary of state to release.
Title Theory
Mortgage transfers title to a property to the mortgagee, who holds it until the mortgage has been paid off. The title then passes to the mortgagor. Bank holds deed until paid off.
Lien Theory
Buyer has legal title.
Hypothecate
Pledge property but get to keep.
Promissory Note
Debt Document ….Promissory IOU
Characteristics of Promissory Note
1) Evidence of debt
2) Borrower liability
3) Not recorded
4) Negotiable document
Collateral
Security for a note
Lien Document “Claim”
1) Recorded
2) Signed by the borrower “Maker”
3) Notarization- Not under duress and verify the person
4) Legal description of the property.
Types of lien documents
1) Mortgage
2) Trust Deed
Mortgagor
Borrower
Mortgagee
Lender
Mortgage
Legal title and all rights of ownership with mortgagor and owner holds the deed
Deed of Trust
Don’t have to go to court- Non judicial perspective
Trustor- borrower (All rights of ownership)
Who is beneficiary with Deed of Trust
lender
Who holds title with Deed of Trust
Trustee holds bare legal title (No rights of ownership)
Example: Escrow company, Attorney, lender, Broker, Insurance agent
Who holds the deed with Deed of Trust?
Trustor
Duties of trustee
Non judicial foreclosure, release and reconvey
Duties of borrower
1) Pay debt as agreed
2) Pay real estate taxes and assessments.
3) Keep the property insured.
4) Abide by all covenants in the note and collateral.
