Encumbrances Flashcards
Lien
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
Specific Lien
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
General Lien
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
Mortgage and Deed of Trust Liens
Voluntary specific lien on real estate given to a lender by a borrower as a security for a real estate loan
Real Property Tax Liens
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
Special Assessment Tax Liens
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
Ad Valorem
According to value
Ad Valorem in NC
Ad valorem and special assessment tax liens are valid for 10 years and have priority over other types of liens
Mechanic’s Lien
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
Mechanic’s Lien in NC
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
NC Commercial Real Estate Broker Lien
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.
Judgement
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
Personal Property Tax Liens
General involuntary lien against all property owned by the tax payer, like real property taxes, they have priority over other types of liens
State Tax Liens
General involuntary lien
unpaid state inheritance taxes and unpaid state income taxes
Federal Tax Liens
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.
Deed Restrictions
(encumbrance)
(also referred to as covenants, conditions, restrictions)
Private agreements placed in the public record that affect the use of the land
Lis Pendens
(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.
Writ of Attachemtent
(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
Easement
A nonpossessory right to use the land of another for a particular purpose
Not a for of ownership, just allows use of the property
Easement Appurtenant
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
Servient Tenement
Tract over which easement runs
Dominant Tenement
Tract that benefits from the easement
Easement in Gross
A personal interest in or the right to use the land of another
Benefits a person or entity, not a parcel of property
Easement by Necessity
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
License
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
Encroachment
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
Machinery Act
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
Mill
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%.)
Annual Taxes Equation
tax rate x assessed value
Assessed Value Equation
annual taxes (divided by) tax rate
Tax Rate Equation
annual taxes (divided by) assessed value
