Real Estate Taxes And Other Liens Flashcards
Lien
A charge or claim against a persons property made to enforce the payment of money. Not just borrowed money, also placed by government for payment if property tax owed, assessment, or special charge.
Represents interest in ownership but not actual ownership.
It is an encumbrance on owners title. It runs with the land and will bind all owners until paid.
It lessens its value or impairs its use because it binds all owners.
Security
Aka collateral
Something of value that the borrower promises to give the lender if the borrower fails to repay the debt.
Mortgage lien
Lenders security in the form of real estate
Voluntary lien
Becomes a lien when the lender records the documents in the county where the property is located. Lenders require a preferred lien (first mortgage lien). Gives priority in lien
Encumbrance
Any charge or claim that attaches to real property and lessens its value or impairs its use. Encumbrances can pass with the title
Voluntary lien Involuntary lien Statutory lien Tax lien Equitable lien
- created intentionally by the property owners action, such as taking out mortgage loan
- not a matter of choice; it is created by law and may be either statutory or equitable.
- involuntary, statutory lien. Exists without any action by the property owner.
- arises out of common law. A court ordered judgement that requires a debtor to pay a balance on a delinquent charge account, filed in county.
General lien
Affects all the property, both real and personal, of a debtor. Includes judgements, estates and inheritance taxes, decendents debts, corporate franchise taxes, and IRS taxes. A lien attaches to real property at the moment it is filed and recorded. A lien does not attach to personal property until it is seized.
Specific liens
Are secured by specific property and affect only that particular property. Includes vendors liens, mechanics liens, mortgage liens, real estate tax liens, and liens for special assessments and utilities.
Vendors lien
A lien belonging to the vendor (seller) for the unpaid purchase price of property.
Priority of liens
Junior lien
Refers to the order in which claims against the property will be satisfied if the property is sold by the debtor.
General rule- first to record, first in right.
-lien that comes after an earlier lien
Special assessments and real estate taxes take priority over all other liens.
Subordination agreements
Written agreements between lien holders to change the priority if mortgage, judgement, and other liens.
General real estate tax is an Ad valorem tax
Latin for “according to value”. They are based on the value of the property being taxed and are specific, involuntary, statutory liens levied by states, counties, municipalities, and school and other districts. Favored source of revenue for local gov. Pay for government services.
Exceptions are available for certain property uses.
Exemptions from general taxes
Properties owned by:
- cities
- various municipal organizations (schools, parks, playgrounds)
- state and federal governments
- religious and charitable organizations
- hospitals
- educational institutions
Give deductions to veterans, older people, agricultural land, industries, and sports franchises.
Assessment
Real estate valued for tax purposes by county or township assessor sir appraisers. The value is generally based on the sales prices of comparable properties. Land value may be assessed separately from buildings or other improvements.
Assessment Equalization factor
Used to correct inequalities in statewide tax assessments. An equalization factor may be applied to raise or lower assessments in particular district or county.
Tax rates
Expressed in MILLS
- Adoption of budget by each taxing district. Must include estimate of all expenditures.
- Appropriation, taxing body authorizes the expenditure of funds and provides for the sources of the funding. Some states require voter approval.
- Tax levy- the amount to be raised is imposed on property owners.
Taxes can be payable in 2 installments (semiannually), 4 installments (quarterly), or 12 installments (monthly).
Tax levy
The formal action taken to impose tax, usually by a vote of the taxing districts governing body.
Mill
1/1000 of a dollar or $0.001.
I.e.; tax rate of .032 or 3.2% = 32 mills or $3.20 per $100
10 mills In a penny
Enforcement of taxes
Must be valid to be enforceable. Must be charged properly, used for legal purpose, and be applied equitably to all property.
Tax sale
Way to collect real estate taxes that have remained delinquent for the statutory period. Held according to a published notice after a court has rewarded a judgement. It is advertised in local newspapers and notice of sale is posted on property. The county sheriff or public official holds a public sale of property. Certificate of sale is given to highest bidder. Must pay delinquent tax.
Statutory right of redemption
Period of redemption time AFTER tax sale in which defaulted owner may redeem property by paying the amount owed plus interest and charges.
Equitable right of redemption
The delinquent taxpayer may redeem the property anytime before the tax sale.
Special assessment
A tax charged on real estate to fund public improvements to the property, and it creates a lien for the amount of assessment on the property. Property owners in the area are required to pay because it their properties benefit directly from them. Paid in equal annual installments over a period of years.
Such as properties in a LOCAL IMPROVEMENT DISTRICT (LID)
Mechanics lien
A specific, involuntary lien that gives security to persons or companies that perform labor or furnish material to improve real property.
Must have a contract with the owners authorized representative, such as a general contractor.
Notice of nonresponsibility
If improvements that were not order by the property owner have commenced, they can file for this to be relieved from possible mechanics liens.
Judgement
A decree issued by a court. When the decree establishes the amount a debtor owes and provides for money to be awarded, it is called a money judgement.
It is general, involuntary, equitable lien on both real and personal property.
Priority of judgement lien
- date judgement was entered by court
- date judgement was filed in recorders office
- date writ of execution was issued
Writ of execution
It’s a legal document that directs the sheriff to seize and sell as much of the debtors property as is necessary to pay both debt and expenses of sale.
Satisfaction of judgement
Aka satisfaction piece
This clears the record of a lien. Used when real property is sold to satisfy debt. Debtor should demand this.
Lis pendens
When any suit that affects title to or possession of real estate is filed; a special notice known as lis pendens is recorded. Notice of possible future lien.
Writ of attachement
Court order against property of another person that directs the sheriff or other officer of court to seize or take control of a property. Court retains custody of property until suit concludes. Most arise from an action for payment of an unsecured debt.
Federal estate taxes and inheritance taxes
Are general, statutory, involuntary liens that encumber a deceased persons real and personal property. Normally paid or cleared in probate court proceedings.
Lien for municipal utilities
Municipalities often have the right to impose a specific, equitable, I voluntary lien on the property of an owner who refuses to pay bills for municipal utility services.
Bail bond lien
The execution and recording of a bail bond create a specific, statutory, voluntary lien against the owners real estate.
Corporation franchise tax lien
State governments generally levy a corporation franchise tax on corporations as a condition of allowing them to do business in the state. Such a tax is general, statutory, involuntary lien on all real and personal property owned by the corporation.
IRS Tax lien
Results from a persons failures to pay any portion of federal taxes, such as income and with holding taxes. Is general, statutory involuntary lien on all real and personal property. If does not supersede previously recorded liens.
Delinquent
Taxes can be collected through a tax sale following statutory notice requirements.
