Unit 15 Flashcards
Lien
a charge or claim against a person’s property made to enforce the payment of money
security
something of value that the borrower promises to give the lender if the borrower fails to repay the debt; collateral
Mortgage lien
when the lender’s security is in the form of the real estate
Are all liens encumbrances?
yes
Are all encumbrances lien?
no
4 ways to create a lien
- Voluntary
- Involuntary
- Staturoty
- Equitable
Voluntary Lien
created intentionally by the property owner’s action
Involuntary Lien
not a matter of choice; created by law
Types of involuntary lien
- Statutory
2. Equitable
Statutory lien
created by statute, state law says it must be paid
Equitable lien
arises out of common law; should be paid but might be other ways to work it out
Tax lien
involuntary statutory lien; exists without any action by the property owner
General Liens
affect all the property, both real and personal, of a debtor
When does a lien attach to real property?
at the moment it is filed and recorded
When does a lien attach to personal property?
when personal property is seized
What do general liens include?
judgements, estate and inheritance taxes, decendent’s debts, corporate franchise taxes, IRS taxes
Specific Liens
secured by specific property and affect only that particular property
Specific liens on real estate
vendors’ liens, mechanics’ liens, mortgage liens, real estate tax liens, liens for special assessments and utilities
Vendor’s lien
lien belonging to the vendor (seller) for the unpaid purchase price of the property, when the vendor has not taken any other lien or security beyond the personal obligation of the purchaser
Effect of lien on title
title can still pass over to buyer with lien on title
Release of lien
title is cleared of lien by lienholder
Runs with the land
passes with title
Do liens run with the land?
yes
Priority of liens
the order which claims against a proeprty will be satisfied if the property is sold by the debtor
What is the general rule for priority of liens?
first to record, first in right (priority)
Junior lien
one that comes after a ealier lien
Subordination agreements
written agreements between lienholders ot change the priority of mortgage, judgement and other liens
How are liens different from other encumbrances?
they’re financial or monetary in nature and attach to the property becuase of a debt
How are foreclosed liens paid?
from the proceeds of the sale
Types of real estate taxes
- general real estate taxes
2. special assessements or improvement taxes
What takes priority over all liens no matter when they are recorded?
real estate taxes & special assessments
Ad Valorem Tax name
general real estate tax
Ad Valorem Tax
based on teh value of the property being taxed and are specific, involuntary, statutory liens
Properties excempt from general taxes
cities, municipal organizations, state and federal governments, religious and charitable organizations, hospitals, educational institutitions
what do you pay real estate taxes on?
assessed value
How do you calculate annual tax bill?
assessed vlue * tax rate
Assessment Equalization Factor
used when it is necessary to correct inequalities in statewide tax assessements to achieve uniformity
How to use equalization factor
[assessed value * (1+equalization factor%)] * Tax rate
How to get a tax rate
- make a budget by each taxing district
- Appropriation
- Tax Levy
- Tax Rate
Appropriation
a taxing body authorizes the expenditure of funds and provides for the sources of funding
How are tax rates expressed?
- $ per $100
- $ per $1000
- Mills
Mill rate
a way of expressing a tax rate in $ per $1000
Due dates for taxes are set how?
by statute
Equitable right of redemption
the delinquent taxpayer may redeem the property any time before the tax sale
How to exercise equitable right of redemption
by paying the delinquent taxes plus interest and charges
What is government’s power over real estate owners?
right to impose taxes to pay for their functions
Who has priority over previously recorded liens?
annual taxes levied on real estate
What does ad valorem mean?
according to value
Why are real estate property taxes favored sources of revenue for local governments?
real estate cannot be hidden and is relatively easy to value
What do property taxes pay for?
states; counties; cities, towns, boroughs, and villages; school districts; drainage districts; hospital districts; water districts; sanitary districts; transporation districts; parks, forest preserves, and recreation districts
Assessment
official real estate valuation process where real estate is valued for tax purposes by county or township assessors or appraisers
What is assessment value based on?
sales price of comparable properties
What does a budget cover?
the financial requirements of the taxing body for the coming fiscal year, including an estimate of all expenditures for the year
Appropriation
a taxing body authorizes the expenditure of funds and provides for the sources of the funding; oftens involves adoption of an ordinance or passage of law for specific terms of the proposed taxation
Tax levy
formal action taken to impose a tax, usually by a vote of the taxing district’s governing body
What real estate taxes are enforceable
valid taxes meaning they are charged properly, used for legal purposes, applied equitably to all property
How are Real Estate Taxes that have been delinquent for a statutory period collected?
Tax Sale
Tax Sale
usually help according to a published notice after a court has rendered a judgement for overdue taxes, penalities and administrative costs and has ordered the property be sold
Who is the certificate of sale given to in a tax sale?
highest bidder
When is the certificate of sale given in a tax sale?
after the bidder pays the delinquent tax amount in cash
who holds the public sale of a property?
county sheriff or other public official
Does the person with a certificate of sale on a tax sale immediately receive the deed?
No
Statutory right of redemption
the defaulted owner can redeem the property from a tax sale by paying teh amount collected at the tax sale + interest and charges
Tax Deed (Sheriff’s Deed)
title conveyed to the certificate of sale holder when the property is not redeemed within the statutory period
Special Assessment
a tax charged on teh real estate to fund public improvements to the property, and it creates a lien for the amount of the assessment on the property
Who pays for the special assessment?
property owners
How are special assessments paid for?
euqal annual installments over a period of years
Can property owners prepay on special assessment installemnts?
yes
Local Improvement District (LID)
a specific geographial area formed by a group of property owners working together to fund needed capital improvements
LID Taxation
a financing method available for the desing and construction of public improvements
Mortgage lien
a specific, voluntary lien on real estate given to a lender by a borrower as security for a real estate loan
When does a mortgage lien become a lien on real property?
when the lender records the documents in the COUNTY where the property is located
preferred lien
no other liens against the property (aside from real estate taxes) can take priority over the mortgage lien
Mechanic’s lien
a specific, involuntary lien that gives security to persons or companies that perform labor or furnish material to improve real property
Who are mechanic’s liens available to?
contractors, subcontractors, architects, equipment lessors, surveyors, laborers, other providors
When is a mechanic’s lien filed?
when the owner has not fully paid for the work or when the general contractor has been compensated bu has not paid the subcontractors or suppliers of matierals
What is required for a contractor to receive a payment from the owner’s construction loan?
lien waiver
who is entitled to a mechanic’s lien?
person who did the work and has a contract with teh owner or the owner’s authorized representative
What clears a property’s title of a lien?
release or satisfaction of lien
How do mechanic’s liens establish priority?
date the construction began or material were first furnished; the date the work was completed; the date the individual subcontractor’s work was commenced or completed; the date the contract was signed or work was ordered; date a notice of the lien was recorded, filed, posted or served
Notice of nonresponsibility
relieves property owner of possible mechanics’ liens from improvements that were not ordered by the property owner
Judgement
a decree issued by a court
money judgement
a decree establishes the amount a debtor owes and provides for money to be awarded
What type of lien is a judgement?
involuntary equitable lien on both real and personal priorty owned by the debtor
How is a judgement different from a mortgage
no specific parcel of real estate was given as security at the time the debt was created
Where must the creditor file a judgement?
in any county to which a creditor wishes to extend the lien coverage
writ of execution
directs the sheriff to seize and sell as much of the debtor’s property as is necessary to pay both teh debt and the expenses of the sale
How does one enforce a judgement?
writ of execution
When does a judgement become a lien?
when the creditor orders the sheriff to assess the property and the charge is actually made
How is a judgement lien’s priority estblished?
- date the judgement was entered by the court
- date the judgement was filed in a recorder’s office
- date a writ of execution was issued
Satisfaction of judgement
legal document for when real property is sold to satisfy a debt
What clears the record of a judgement lien?
satisfaction of judgement/satisfaction piece
Lis Pendens
recorded notice of a pending lawsuit that affects title to or possession of real estate
is a lis pendens a lien?
no, but could become one
What does a lis pendens do?
notifies prospective purchasers and lenders that there is a potential claim against a property and establishes priority of a later lien
Writ of Attachment
a court order against the property of another person that directs the sheriff or other officer of the court to seize or take control of a property
why would a creditor want a writ of attachment?
to prevent a debtor from conveying title to previously unsecured real estate while a court suit is being decided
What do most attachments arise from?
an action for payment of an unsecured debt
Who retains control of a property in an attachment
court until suit concludes
estate taxes and inheritance taxes
general, statutory, involuntary liens that encumber a decreased person’s real and personal property; normally paid or cleared in probate court proceedings
lien for municipal utilities
municipalities have the right to impose a specific, equitable, involuntary lien on the property of an owner who refuses to pay bills for municipal utility services
bail bond lien
real estate owner who is charged with a crime that will result in a trial may post bail in the form of real estate rather than cash; specific, satutory, voluntary lien
corporation franchise tax lien
levied by state governments on corporations as a condition of allowing them to do business in the state; general, statutory, involuntary lien on all real and personal property owned by the corporation
IRS Tax lien
results from a person’s failture to pay any portion of federal taxes; general, satutory, involuntary lien on all real and personal property held by the delinquent taxpayer
Priority of IRS Tax lien
date of filing or recording
