Section 9 - Encumbrances and Title Insurance

Question 1

When does title officially change hands?

A) With the transfer of the deed from the seller to the buyer.
B) When the deed is recorded
C) When actual notice of the deed is given to the mortgage company
D) After the final document is signed at closing

Answer 1

A.

Title officially changes hands with the transfer of the deed. Recordation provides constructive notice and presumes delivery of the deed.

Question 2

A general, INVOLUNTARY lien brought against a property due to a court decree resulting from a lawsuit.

Answer 2

JUDGMENT LIEN

general

Question 3

A general, INVOLUNTARY lien the IRS places against a property for due and unpaid taxes.

Answer 3

INCOME TAX LIEN

general

Question 4

A general, INVOLUNTARY lien placed on all of the property inherited by a deceased person’s heirs.

Answer 4

ESTATE / INHERITANCE TAX LIEN

general

Question 5

A specific, voluntary lien against a single property that uses the property as collateral for repayment of a loan.

Answer 5

MORTGAGE LIEN

specific

Question 6

A specific, INVOLUNTARY lien contractors or subcontractors place against a non-paying client’s property.

Answer 6

MECHANIC’S LIEN

specific

Question 7

A general, INVOLUNTARY lien placed against a deceased person’s estate if there are unpaid debts to creditors.

Answer 7

DECEASED PERSON’S DEBT

general

Question 8

A specific, INVOLUNTARY lien placed against owners who haven’t paid their property taxes.

Answer 8

REAL PROPERTY TAX LIEN

specific

Question 9

A legal notice that a lawsuit is pending that affects the title of a property.

Answer 9

A LIS PENDENS

Question 10

Lien rights do not survive foreclosure or sale of the property.

TRUE or FALSE?

Answer 10

FALSE.

Lien rights do survive foreclosure and the sale of the property, except for foreclosure on acquisition construction loans.

Question 11

The right to lien does not extend to material suppliers.

TRUE or FALSE?

Answer 11

FALSE

The right to lien does extend to material suppliers. These are contractors and suppliers who have direct contact with subcontractors. Material suppliers are also known as sub-subcontractors.

Question 12

In California, even if the owner has paid the general contractor in full, if the subcontractor were not paid in full, the subcontractor can establish a lien and eventually foreclose on the property.

TRUE or FALSE?

Answer 12

TRUE.

This is one of the reasons why the property owner can require contractors to obtain a payment bond. If the contractors don’t pay their subcontractors, the owner who has paid the contractor is off the hook.

Question 13

There are specific deadlines associated with filing a claim for a mechanic’s lien. What’s the deadline with its required activity?

The contractor or subcontractor must file a preliminary notice with the owner.

Answer 13

20 days of work starting.

Question 14

There are specific deadlines associated with filing a claim for a mechanic’s lien. What’s the deadline with its required activity?

Mechanic’s lien claimants must file the lien in court if the owner has not filed a notice of cessation or completion.

Answer 14

Up to 90 days after work ends.

Question 15

There are specific deadlines associated with filing a claim for a mechanic’s lien. What’s the deadline with its required activity?

Contractors filing a mechanic’s lien must file the lien in court if the owner has filed a notice of cessation or completion.

Answer 15

Up to 60 days after work ends

Question 16

There are specific deadlines associated with filing a claim for a mechanic’s lien. What’s the deadline with its required activity?

Subcontractors and material suppliers filing a mechanic’s lien must file the lien if the owner has filed a notice of cessation or completion.

Answer 16

Up to 30 days after work ends.

Question 17

There are specific deadlines associated with filing a claim for a mechanic’s lien. What’s the deadline with its required activity?

Mechanic’s lien is enforced.

Answer 17

90 days after filing lien.

Question 18

Provides a summary of the chain of title history, usually accompanied by a lawyer’s opinion of title.

Answer 18

ABSTRACT OF TITLE

Question 19

Provides a summary of the chain of title history similar to an abstract of title, but is based on the title company’s title plant

Answer 19

CERTIFICATE OF TITLE

Question 20

Establishes the title history or path and proof of ownership.

Answer 20

CHAIN OF TITLE

Question 21

Establishes proof of ownership.

Answer 21

DEED

Question 22

Assures that title to the property is free and clear of liens and only subject to loan payoff and any taxes owed

Answer 22

MARKETABLE TITLE

Question 23

Title insurance policy that protects the buyer from basic defects in the title.

Answer 23

STANDARD-COVERAGE POLICY

Question 24

Describes the property and identifies any outstanding encumbrances or, includes what will and will not be covered by the insurance policy.

Answer 24

PRELIMINARY REPORT

Question 25

Policy that protects the buyer from a greater range of defects, including unrecorded encumbrances. Used most often for the lender’s benefit.

Answer 25

EXTENDED-COVERAGE POLICY