Unit 13 - part 1

Question 1

lien

Answer 1

A lien is a charge or claim against a person’s property made to enforce the payment of money.

If a lien is not paid in the allotted time, the lienholder may foreclose on the lien, potentially forcing the sale of the property as set out by state law.

Question 2

mortgage lien

Answer 2

When the lender’s security is in the form of real estate, the security interest is called a mortgage lien.

Question 3

encumbrance

Answer 3

An encumbrance is any charge or claim that attaches to real property and lessens its value or impairs its use.

All liens are encumbrances but not all encumbrances are liens.

• easement don’t prevent transfer of title
• liens does

Question 4

Types of Liens

Answer 4

There are many different types of liens.

One way that liens are classified is by how they are created:

• A voluntary lien
• An involuntary lien:
  1. A statutory lien
  2. An equitable lien

Liens may be classified according to the type of property involved:

• General liens
• Specific liens
• Vendor’s lien

Question 5

voluntary lien

Answer 5

Take on willingly to purchase real estate.

Question 6

involuntary lien

Answer 6

Placed on property without consent to secure a debt (taxes, judgements, mechanics liens)

Question 7

statutory lien

Answer 7

Placed on property by statue., such as tax liens

Question 8

equitable lien

Answer 8

Placed by court on a property to keep a lien holder from foreclosing and being unfairly enriched. (IRS)

Question 9

General liens

Answer 9

General liens affect all the property, both real and personal, of a debtor.

Creditor’s right to have debtor’s property sold to satisfy a debt.

Question 10

Specific liens

Answer 10

Specific liens are secured by specific property and affect only that particular property.

• on a specific identified piece of land or property

Question 11

vendor’s lien

Answer 11

A vendor’s lien is the right of a seller to repossess the property sold until the buyer makes all payments for the full purchase price.

Question 12

Effect of Lien on Title

Answer 12

The existence of a lien does not necessarily prevent a property owner from transferring title to someone else.

The lien might reduce the value of the real estate. Because the lien attaches to the property, not the property owner, a new owner might lose the property if the creditors take court action to enforce payment. Once in place, a lien runs with the landand will bind all successive owners until the lien is paid.

skola:

• liens have to be paid off and released
• title company won’t transfer a property with unreleased liens

Question 13

Priority of liens

Answer 13

In general, the rule for priority of liens is first to record, first in right (priority).

The priority of payment typically is established by the date the liens are placed in the public record.

There are some notable exceptions to this rule. Real estate taxes and special assessments generally take priority over all other liens, regardless of the order in which the liens are recorded.

Question 14

Subordination agreements

Answer 14

Subordination agreements are written agreements between lienholders to change the priority of mortgage, judgment, and other liens. Under a subordination agree- ment, the holder of a superior or prior lien agrees to permit a later lienholder’s interest to take precedence.