Unit 15: Real Estate Taxes and Other Liens

Question 1

A lien is a claim of a creditor or taxing authority against the ____ ________ of a debtor that is used as security to ensure _________ of the debt.

Answer 1

real property, repayment

Question 2

A lien is not an ownership interest in real estate; it is an ___________ that transfers with it (____ with the ____) and lessens its value or impairs its use because it binds all successive owners until ____ and _______.

Answer 2

encumbrance, runs with the land, paid and cleared

Question 3

If a debtor defaults in payment of a debt secured by property, the lienholder can force the ____ of the property, or _______ _____.

Answer 3

sale, acquire title

Question 4

A lien may be _________, if it is created by action of the property owner, such as a mortgage.

Answer 4

voluntary

Question 5

A lien may be ___________, if it is created without the property owner’s express permission.

Answer 5

involuntary

Question 6

A lien may be _________, if it is permitted by statute, or _________, if it is granted by a court.

Answer 6

statutory, equitable

Question 7

A _______ lien affects all of a debtor’s property, both real and personal; a ________ lien affects only identified property.

Answer 7

general, specific

Question 8

Generally, the first lien to be recorded will take priority, but ____ ______ taxes and _______ ___________ usually take priority over all other liens.

Answer 8

real estate, special assessments

Question 9

If a ______ lien is foreclosed, the property is still subject to prior liens.

Answer 9

junior

Question 10

A _____________ agreement between lienholders can be used to change the order of lien priority.

Answer 10

subordination

Question 11

Real estate taxes are ad valorem (_____________ to the estimated _____ of the real estate) taxes based on the value of the property taxed.

Answer 11

proportional, value

Question 12

________ value is generally based on sales prices of comparable properties.

Answer 12

Assessed

Question 13

An ____________ factor may be applied to correct inequalities in statewide tax assessments.

Answer 13

equalization

Question 14

The ___ ____ for each taxing body is computed separately and may be expressed in “mills”.

Answer 14

tax rate

Question 15

A mill is _/____ of a dollar, or $-.—. Mills may be shown as dollars per hundred or thousand dollars of ________ value.

Answer 15

1/1000, $0.001, assessed

Question 16

The taxpayer usually has equitable _____ of __________ any time before a tax

Answer 16

right of redemption

Question 17

The state may allow a _________ right of redemption following a ___ sale.

Answer 17

statutory, tax

Question 18

If there are no bidders at the tax sale, the property may be forfeited to the _____.

Answer 18

state

Question 19

Special assessments are levied and create a lien on property that benefits from ______ improvements, such as properties located in a _____ ___________ ________ (LID).

Answer 19

public, local improvement district

Question 20

Special assessments are always ________ and _________, but may be voluntary or involuntary, and are usually paid in annual installments

Answer 20

specific and statutory, annual

Question 21

A mortgage lien takes effect when the lender _______ the documents in the ______ where the property is located.

Answer 21

records, county

Question 22

A _____ ________ lien on a property, when recorded, has priority over other liens (except for ___ liens); subsequent liens are ______ liens.

Answer 22

first mortgage, tax, junior

Question 23

A mechanic’s lien is filed when an owner has not fully paid for work or the _______ __________ has been compensated but has not paid ______________ or _________ of materials.

Answer 23

general contractor, subcontractors, suppliers

Question 24

A property owner who did not order improvements that are being made should _______, ____, and ______ a notice of nonresponsibility to be relieved from possible lien claims.

Answer 24

execute, post, and record

Question 25

A judgment, a decree issued by a court, is a _______, involuntary, equitable lien on both real and personal property owned by a debtor and must be filed in every ______ in which the judgment debtor owns property.

Answer 25

general, county

Question 26

While a lawsuit is pending, a ___ _______ can be filed to give notice of an action pending relating to the title or possession of real property and establish priority of the claimant, and a _____ of __________ can be sought from the court to authorize the sheriff to seize the property that the debtor may attempt to transfer. A _____ of _________ can be obtained from the court to enforce a judgment.

Answer 26

lis pendens, writ of attachment, writ of execution

Question 27

______ and ___________ tax liens are general, _________, involuntary liens that encumber a deceased person’s real and personal property and are normally paid or cleared in a _______ proceeding.

Answer 27

Estate and inheritance, statutory, probate

Question 28

A lien for municipal utilities is a ________, equitable, involuntary lien on the property of the owner who _______ to pay bills for municipal utility services.

Answer 28

specific, refuses

Question 29

A ___________ _________ tax lien is a general, statutory, involuntary lien on real and personal property owned by the corporation.

Answer 29

corporation franchise

Question 30

An IRS tax lien is a general, statutory, involuntary lien on all real and personal property held by a __________ taxpayer; it ____ ___ _________ previously recorded liens (which is also true of most state income tax liens).

Answer 30

delinquent, does not supersede

Question 31

A vendor’s lien is a lien belonging to the seller for the ______ purchase price of the property, when the vendor has not taken any other lien or security. Vendors’ liens in real estate are uncommon and arise out of the use of _____ _________ to sell property.

Answer 31

unpaid, owner financing

Question 32

T/F: An equitable lien arises out of common law.

Answer 32

True

Question 33

T/F: An involuntary lien is created by law and is statutory (not equitable).

Answer 33

False. An involuntary lien is created by law and may be either statutory or equitable.

Question 34

The ______ _____ levied on real estate in most states usually have priority over previously recorded liens and may be enforced by a _____-_______ sale.

Answer 34

annual taxes, court-ordered

Question 35

Is it possible for the present owner of the house to reclaim it, even if there is a tax sale?

Answer 35

The answer is yes, depending on state law. If the owner’s state provides a statutory right of redemption following a tax sale, the present owner can reclaim the property by paying the amount collected at the tax sale plus interest and charges (including any taxes levied since the sale).

Question 36

Can there be a property tax lien if it is not filed in the public record?

Answer 36

The answer is yes. A property tax lien can be effective and take priority over other liens, even if it is not made part of the public record.

Question 37

Can property be sold for nonpayment of taxes, even if the current owner was not aware of the debt against the property?

Answer 37

The answer is yes. The property will be sold if the back taxes plus late fees are not paid.

Question 38

The process involved in imposing property taxes is generally the same for most taxing districts. Put each step in its proper order.

1. The funds needed are appropriated by ordinance;
2. A budget is adopted by each taxing district;
3. Tax bills are made using tax rate and assessed value;
4. A tax levy is agreed to by vote of governing body;
5. Tax bills and due dates are delivered to owners.

Answer 38

2, 1, 4, 3, 5

Question 39

A prospective purchaser of property that has been recently constructed, altered, or repaired should be cautious about possible __________ mechanics’ liens against the property.

Answer 39

unrecorded

Question 40

Is a judgment lien general or specific, and involuntary or voluntary?

Answer 40

general, involuntary

Question 41

Is a vendor lien general or specific, and involuntary or voluntary?

Answer 41

specific, involuntary

Question 42

Is a mechanic’s lien general or specific, and involuntary or voluntary?

Answer 42

specific, involuntary

Question 43

Is a real estate lien general or specific, and involuntary or voluntary?

Answer 43

specific, involuntary

Question 44

Is a mortgage lien general or specific, and involuntary or voluntary?

Answer 44

specific, voluntary

Question 45

If improvements that were not ordered by the property owner have commenced, the property owner should execute a document called a notice of ________________ to be relieved from possible mechanic’s liens.

Answer 45

nonresponsibility