Chapter 5 Mastering Real Estate: Encumbrance - Liens

Question 1

What is a lien?

Answer 1

A claim against the property to provide security for a debt/obligation owed.

Question 2

Who is the lienor?

Answer 2

The person holding the lien.

Question 3

Who is the lienee?

Answer 3

The person whose property is encumbered by the lien.

Question 4

What is a general lien versus a specific lien?

Answer 4

Against all property - real and personal; Specific is against a specific property, real or personal

Question 5

What is a voluntary versus an involuntary lien?

Answer 5

Voluntary liens are made with the owner’s consent, like a mortgage. Involuntary liens are created by law and do not require consent (taxes).

Question 6

Define the two kinds of involuntary liens.

Answer 6

Statutory liens, created by state law.

Equitable liens created by court when fairness IMPLIES a lien exists.

Question 7

What are the three ways liens are created?

Answer 7

Contractually
Statutory
Equitable

Question 8

What is the priority of liens?

Answer 8

Outstanding real estate taxes
Special assessments
In the order other liens were created

Question 9

What is a subordination agreement?

Answer 9

Agreeing to give priority to another lien.

Question 10

What is the ad valorem tax?

Answer 10

Raises money for various government agencies. It is based on the assessed value.

Question 11

What is an equalizer?

Answer 11

It raises or lowers the assessed value to achieve uniformity and correct inequalities in statewide assessments.

Question 12

What is a mills?

Answer 12

A Mill is 1/10 of a 1 cent or $.001

Question 13

What are the three characteristics of a VALID real estate tax?

Answer 13

Properly levied
For a legal purpose
Applied Equitably to all properties

Question 14

What are the two types of redemption rights?

Answer 14

Equitable redemption rights (before the tax sale - pay back taxes, penalties and court costs)
Statutory redemption rights (after tax sale - interest to the winner of the tax sale, back taxes, and penalties.)

Question 15

What is a special assessment?

Answer 15

A tax levied on specific parcels of real estate to pay for local improvements.

Question 16

What are the two ways a cost of improvement is allocated over properties?

Answer 16

Fractional basis

Cost per foot basis

Question 17

How long are special assessments payable?

Answer 17

Usually 5-10 years

Question 18

Define TIF.

Answer 18

Tax Incremental Financing. It helps a municipality redevelop a defined geographic area.

Question 19

What are the three ways a real estate tax can be expressed?

Answer 19

1. As a percentage
2. In mills
3. In dollars per hundred of assessed value

Question 20

What is a mortgage lien?

Answer 20

A specific, voluntary lien.

Question 21

What is a mechanic’s lien?

Answer 21

A lien from someone who provides materials or services for the real estate.

Question 22

What is a judgement lien?

Answer 22

It is created by the court at a conclusion of a lawsuit. It is a general, involuntary lien.

Question 23

What is a writ of attachment?

Answer 23

It prevents a defendant from transferring the title of the real estate while a suit is being decided.

Question 24

What are liens against the estate?

Answer 24

General, involuntary liens put on my creditors and by the state/fed govt for estate and inheritance taxes.

Question 25

What is an income tax lien?

Answer 25

A general, involuntary lien. Effective for 10 years.

Question 26

What are the priority of state and federal income tax liens based on?

Answer 26

The date of recording.

Question 27

What is a municipal utility lien?

Answer 27

A specific, involuntary lien.

Question 28

What does lis pendens mean?

Answer 28

A lawsuit is pending.