Encumbrances

Question 1

Lien

Answer 1

Nonpossessory charge against a property that provides security for a debt or obligation of the property owner

Two types of liens; General and Specific

Attach to property, not property owner

Question 2

Specific Lien

Answer 2

A lien affecting or attaching only to a specific parcel of land or piece of real property; Ex: Mortgage Lien

Voluntary: Mortgage
Involuntary: Real property taxes, special assessments, mechanic’s liens, NC commercial real estate broker lien

Question 3

General Lien

Answer 3

Affect all property of a debtor, both real and personal, rather than a specific parcel of real property

Ex: judgements, personal property tax liens, state and federal tax lien

Question 4

Mortgage and Deed of Trust Liens

Answer 4

Voluntary specific lien on real estate given to a lender by a borrower as a security for a real estate loan

Question 5

Real Property Tax Liens

Answer 5

Unpaid taxes on the property becomes a specific, involuntary lien on the property. Real property tax takes priority over all other liens. Taxed on ad valorem basis

Question 6

Special Assessment Tax Liens

Answer 6

Purpose of these taxes is to pay for an improvement that has benefited the taxed property, such as street paving or installation of sewer system

Question 7

Ad Valorem

Answer 7

According to value

Question 8

Ad Valorem in NC

Answer 8

Ad valorem and special assessment tax liens are valid for 10 years and have priority over other types of liens

Question 9

Mechanic’s Lien

Answer 9

A specific, involuntary lien secured by interest in real property to give to contractors, laborers, and materialmen who performed work or furnished materials in the erection or repair of a building

Filed property owner has not paid for work

Question 10

Mechanic’s Lien in NC

Answer 10

A person claiming a mechanics lien in NC must file the lien claim within 120 days after last furnishing the labor or materials; the lien takes effect from the date that person first furnished the labor or materials

A property owner who applies for a building permit for improvements totaling more than $30,000 must designate an approved lien agent

Question 11

NC Commercial Real Estate Broker Lien

Answer 11

A 2011 North Carolina law allows a real estate broker with a written agency agreement to represent a property owner in a commercial transaction to place a lien on the property to be sold or leased to protect the broker’s commission.

Question 12

Judgement

Answer 12

A decree issued by a court
(Involuntary General Lien)

In NC a judgement lien is good for 10 years from the date of the judgement

Question 13

Personal Property Tax Liens

Answer 13

General involuntary lien against all property owned by the tax payer, like real property taxes, they have priority over other types of liens

Question 14

State Tax Liens

Answer 14

General involuntary lien

unpaid state inheritance taxes and unpaid state income taxes

Question 15

Federal Tax Liens

Answer 15

General involuntary lien

An IRS tax lien results from a person’s failure to pay any portion of federal IRS taxes, such as income and withholding taxes. A federal tax lien is a general, involuntary lien on all real and personal property held by the delinquent taxpayer.

Question 16

Deed Restrictions

Answer 16

(encumbrance)
(also referred to as covenants, conditions, restrictions)

Private agreements placed in the public record that affect the use of the land

Question 17

Lis Pendens

Answer 17

(encumbrance)
Recorded legal document giving constructive notice that an action potentially affecting tittle to a particular property has been filed in either state or a federal court; Title is effectively unmarketable during litigation

Ex: If a lender is filing a foreclosure suit against a property owner, it will file a lis pendens against the property. If the property owner should sell the property during the course of the legal action, the new purchaser would take title subject to the outcome of the foreclosure action.

Question 18

Writ of Attachemtent

Answer 18

(encumbrance)
At the request if a creditor, the court retains custody of the unsecured property during the lawsuit to ensure that the property remains available to satisfy a judgement ordered as a resolution of the suit by the court

Question 19

Easement

Answer 19

A nonpossessory right to use the land of another for a particular purpose

Not a for of ownership, just allows use of the property

Question 20

Easement Appurtenant

Answer 20

An easement that us annexed to the ownership of one parcel of land and used for the benefit of another parcel of land

For easement appurtenant to exist, two adjacent tracts of land must be owned by different parties

Question 21

Servient Tenement

Answer 21

Tract over which easement runs

Question 22

Dominant Tenement

Answer 22

Tract that benefits from the easement

Question 23

Easement in Gross

Answer 23

A personal interest in or the right to use the land of another

Benefits a person or entity, not a parcel of property

Question 24

Easement by Necessity

Answer 24

An easement allowed by law as necessary for the full enjoyment of a parcel of real estate; ex: to allow a landlocked owner a right of ingress and egress over a grantors land

Question 25

License

Answer 25

Personal, non-transferrable privilege to enter the land o another for a specific purpose
Ex: a license for a friend to hunt on the farmers land during the winter

License can be terminated or revoked; not considered an encumbrance because it is not considered to be an interest in the property
Automatically ends with the death of either party or sale of the land

Question 26

Encroachment

Answer 26

An improvement or any portion of an improvement, such as a building or fence, illegally extends beyond the land of its owner and covers the land of an adjacent owner, street or alley

Question 27

Machinery Act

Answer 27

Regulates standards for real property taxation, standards for property tax assessment, standards for property tax appraisals, and requirements for tax-exempt status

NC Machinery Act mandates that value is 100% of market value

Question 28

Mill

Answer 28

1 / 1000 of a dollar; or $0.001

For instance, in dollars per hundred or in dollars per thousand. A property tax rate of 0.032, or 3.2%, could be expressed as 32 mills, or $3.20 per $100 of assessed value or $32 per $1,000 of assessed value. (To convert mills into a percent, divide the number of mills by 1,000; for example, 32 mills / 1000 = 0.032 or 3.2%.)

Question 29

Annual Taxes Equation

Answer 29

tax rate x assessed value

Question 30

Assessed Value Equation

Answer 30

annual taxes (divided by) tax rate

Question 31

Tax Rate Equation

Answer 31

annual taxes (divided by) assessed value