Encumbrances Flashcards
Encumbrance
Physical restriction or financial lien placed against a specific property. Places a burden on the title to that property. Money encumbrances and non money encumbrances.
Voluntary Liens
use the property as collateral for repayment of debt. Mortgages and Installment Sales Contracts are the two types.
Mortgage
Mortgage is given by the borrower. Lender records this loan at the registry of deeds.
Note
Document given to the lender from the borrower. It is a promise to repay. This is the primary instrument in a mortgage transaction.
Equitable title
acquired by the buyer when the buyer and seller enter into a Purchase and Sale. The P+S encumbers the sellers bundle of rights to the property
Legal Title
Acquired by the buyer when the deed is delivered to the buyer.
Installment Sales Contract
AKA Land contract/Contract for deed/Conditional sales contract. When the seller conveys their interest in a property to a new buyer.
Legal Title
The vendor(seller) maintains legal title to the property until the financial obligation of the buyer is met.
Equitable Title
The vendee(buyer) has equitable title to the property, the right of possession and use. They acquire legal title to the property when the loan is paid off.
Default
If the buyer defaults on the loan, they lose their equitable title to the property and the equity that they paid to date.
Hierarchy of Involuntary Liens
- Property Taxes/Municipal Betterment Charges
- Mortgage
- Junior Mortgages
- Mechanic Liens
Assessed Value(Ad Valorem)
Property is assessed annually by a city or town according to value. Assessed value is not the actual value of the property.
Determining the Tax Rate
Town Budget
______________
Value of total taxable property in the town =Tax Rate
Tax Due Dates
Taxes are due annually but may be semi-annually or paid quarterly. Semi Annually = November 1st and May 1st
Betterment Assessments
Charges due to a city or town by the owner of property who is selling their property. The charge will be found on the Municipal Lien Certificate ordered by the closing agent.
Mechanics Liens(Specific Lien)
Lien placed on property by a contractor, sub-contractor, or materials person who did not receive payment from a property owner for work performed or materials supplied on a specific property.
General Lien
Lien that includes more than one parcel of property. State or federal government could issue one of these. An IRS lien is a general lien. Lien is based on its filing date. Does not supercede prior recordings
Attachments
A freezing of assets ordered by court action.Prevents owner from selling property.
Easement
Non money encumbrance. Right someone has to use land that belongs to another owner. Automatically transfers to new owner when the property is sold.
Ingress
access in
Egress
access out
Creation of easements appurtenant
created by deed, necessity, or prescription
Easements by Prescription
Court needs to see that land was used
- Openly
- Continuously
- Notoriously
- Without Permission
for 20 years.
C, C&R’s
Covenants, Conditions,Restrictions
Encroachment
unauthorized intrusion and must be addressed when identified.
HOA
Home Owner’s Association
Covenants
Recorded restrictions placed on lots of land or on houses built in a subdivision.
Zoning Ordinances
Implemented by cities or towns regulating use of land, building size, minimum lot size, height requirements and distance from property lines.
4 categories of zoning
Residential
Commercial
Industrial
Agricultural
Variance
When the owner of a property seeks to use the property in a manner inconsistent with the current zoning.
Escheat
If someone died without a will(intestate) and did not have any heirs to leave the property to, their property escheats to the state.
