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CO Realty > Unit 13: Real Estate Taxes and Other Liens > Flashcards

Unit 13: Real Estate Taxes and Other Liens Flashcards

1
Q

What is a lien?

A

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

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2
Q

What is security?

A

It is something of value that the borrower promises to give to the lender if the borrower fails to repay the debt

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3
Q

What is a security in the form of real estate?

A

A mortgage lien

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4
Q

A lien represents an interest in ownership, but does not constitute actual ownership of the property. It is an encumbrance on the owners title. Define encumbrance.

A

Any charge or claim that attaches to real property and lessens its value or impairs its use.

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5
Q

What happens when a property with an encumbrance is conveyed or transferred?

A

The encumbrance transfers with it.

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6
Q

How do liens differ from other encumbrances?

A

They are financial or monetary in nature and attach to the property because of a debt.

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7
Q

What happens if a lien is not paid in the allotted amount of time?

A

The lienholder may foreclose on the lien, potentially forcing the sale of the property as set out by state law.

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8
Q

What is a voluntary lien?

A

It is created intentionally by the property owner’s action, such as when someone takes out a mortgage loan.

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9
Q

What is an involuntary lien?

A

A lien that is not a matter of choice. Its is created by law and may be either statutory or equitable.

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10
Q

What is a statutory lien?

A

It is created by statute. An example is a real estate tax lien, which exists without any action by the property owner. This is an involuntary statutory lien.

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11
Q

What is an equitable lien?

A

An equitable lien arises out of common law. An example would be a court-ordered judgement that requires a debtor to pay the balance on a delinquent charge account. This would be an involuntary equitable lien.

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12
Q

What is a general lien?

A

General liens affect all property, both real and personal, of a debtor. This includes judgments, estate and inheritance taxes, descendants debts, corporate franchise taxes, and IRS taxes.

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13
Q

What is the difference between a lien on real estate vs a lien on personal property?

A

A lien on real estate attaches at the moment it is filed or recorded.

A lien on personal property attaches at the time it is seized.

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14
Q

What is a specific lien?

A

Specific liens are secured by specific property and affect only that property. These include vendors liens, mechanics liens, mortgages liens, real estate tax liens, and liens for special assessments and utilities.

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15
Q

What is a vendor’s lien?

A

A lien belonging to a vendor for the unpaid purchase price of the property, when the vendor has not taken any other lien of security, such as a mortgage, beyond the personal obligation of the purchaser.

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16
Q

Once in place, a lien runs with the land and will bind all successive owners until…

A

The lien is paid or settled and title is cleared by the filing of a release of lien by the lienholder.

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17
Q

What does priority of liens refer to?

A

The order in which claims against the property will be satisfied if the property is sold by the debtor.

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18
Q

What is a good general rule for priorities of liens?

A

First to record, first in right.

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19
Q

What happens if the holder of a junior lien foreclosures on a lien?

A

The property will still be subject the other liens with higher priority first.

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20
Q

What are some exceptions to the rule of lien priority?

A

Real estate taxes and special assessments generally take priority over all other liens, regardless of order of record

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21
Q

What are subordination agreements?

A

Written agreements between leinholders to change the priority of mortgage, judgment, and other liens.

22
Q

What are the two types of real estate taxes?

A
  1. General real estate taxes

2. Special assessments or improvement taxes

23
Q

Define an ad valorem tax

A

Latin for “according to value”

These taxes are based on the value of the property being taxed and are specific, involuntary, statutory liens.

24
Q

Name 6 types of property that are exempt from real estate taxation.

A
  1. Cities
  2. Municipal organizations (schools, parks)
  3. State and federal governments
  4. Religious and charitable organizations
  5. Hospitals
  6. Educational institutions
25
Q

Some states allow for special exemptions to reduce real estate tax bills for certain property owners. Name 3 groups who sometimes can receive this.

A

Senior citizens, veterans, and persons with disability.

26
Q

What is a property tax freeze?

A

In some states a property tax freeze will maintain a same tax assessment for the remaining years that the property owner lives on the property. This is typically for low income senior citizens.

27
Q

Define assessment

A

When real estate is valued for tax purposes by county or township assessors or appraisers.

28
Q

What is an assessment equalization factor?

A

The equalization factor is a set number that is multiplied by the assessed value of each property to determine the tax rate.

29
Q

What are the 3 steps in the process of arriving at a real estate tax?

A
  1. Adoption of a budget for the coming fiscal year
  2. Appropriation, taxing body authorizes the expenditure and provides for the sources of the funding. Sometimes it is voted upon
  3. Tax is imposed through a tax levy.
30
Q

What is a tax levy?

A

The formal action taken to impose a tax, usually by a vote of the taxing district’s governing body.

31
Q

What is a mill?

A

A mill is 1/1000 of a dollar, or $0.001.

Example. Tax rate of 3.2% could be expressed as 32 mills, or $3.20 per $100 of assessed value.

32
Q

How can real estate taxes be collected after they have remained delinquent for the statutory period?

A

A tax sale of the property. A notice is posted on the property and the sale is advertised. A certificate of sale is given to the highest bidder.

33
Q

What is statutory right of redemption?

A

The defaulted owner may redeem the property by paying the amount collected at the tax sale plus interest and charges, as long as it is within the statutory period.

34
Q

What is equitable right of redemption?

A

When a taxpayer pays the delinquent taxes plus interest and charges before a tax sale.

35
Q

What is a special assessment?

A

A tax charged on real estate to fund public improvements to the property. It creates a lien for that amount on the property.

36
Q

What is an LID?

A

It is a local improvement district, it is a specific geographical area formed by a group of property owners working together to fund needed capital improvements.

37
Q

What is a mortgage lien?

A

It is a voluntary lien on real estate given to a lender by a borrower as security for a real estate loan.

38
Q

Define mechanics lien

A

A mechanics lien is a specific, involuntary lien that gives security to persons or companies that perform labor or furnish material to improve real property.

39
Q

What is a money judgment?

A

It is a decree issued by the court that establishes the amount a debtor owes and provides for money to be awarded.

40
Q

A judgment is a …

A

General, involuntary, equitable lien on both real and personal property owned by the debtor.

41
Q

What must be obtained by a creditor to enforce a judgment?

A

A writ of execution from the court.

42
Q

What does a writ of execution do?

A

It directs the sheriff to seize and sell as much of the debtors property as is necessary to pay both the debt and the expenses of the sale.

43
Q

When real property is sold to satisfy a debt, what should the debtor demand?

A

A legal document known as a satisfaction of judgment (or satisfaction piece). Filing this clears the record of the lien.

44
Q

What is a lis pendens, and what does it do?

A

A lis pendens is a special notice of possible future liens on the property. It notifies prospective buyers and lenders that there is a potential claim against the property.

45
Q

What is a writ of attachment and what does it do?

A

It is a court order against the property of another person that directs the sheriff to take control of the property while a court suit is being decided. The court retains custody of the property until the suit concludes.

46
Q

Federal estate taxes and inheritance taxes are…

A

General, statutory, involuntary liens that encumber a deceased person’s real and personal property.

47
Q

How does a bail bond lien work?

A

A real estate owner who is charged with a crime may post bail in the form of real estate. This is a specific, statutory, voluntary lien against the property.

48
Q

What is a lien for municipalities?

A

It is a specific, equitable, involuntary lien on the property of an owner who refuses to pay bills for municipal utility services.

49
Q

What is a corporation franchise tax lien?

A

It is a general, statutory, involuntary lien on all real and personal property owned by a corporation. It is levied by the state, and must be paid for the corporation to do business there.

50
Q

What is an IRS tax lien?

A

It is a general, statutory, involuntary lien that results from a person’s failure to pay any portion of federal taxes.

51
Q

What are the 4 ways to create a lien? (VISE)

A

Voluntary
Involuntary
Statutory
Equitable

CO Realty (7 decks)

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