Unit 8

Question 1

Lien

Answer 1

A charge or claim against a person’s property made to enforce the payment of money. All liens are encumbrances, not all encumbrances are liens. It is only an interest in the ownership. Used when money is borrowed as real estate security. It is also used to recover taxes owed. Includes specific and general and voluntary and involuntary.

Question 2

Encumbrance

Answer 2

Any charge or claim that attaches to real property and lessens value or impairs it’s use. Transfers with the property. Can include liens, easements or encroachments

Question 3

Voluntary Lien

Answer 3

Created intentionally by the property owners action such as when someone takes out a mortgage loan.

Question 4

Involuntary Lien

Answer 4

not a matter of choice. It is created by law and may be either statutory or equitable.
Statutory- Created by statue without any action by the property owner. EX) real estate tax lien
Equitable- arrises out of common law. EX) A court ordered judgement that requires a debtor to pay balance on a delinquent charge account.

Question 5

General Liens

Answer 5

Affect all property real and personal of a debtor. Involuntary taxes

Question 6

Specific Lien

Answer 6

covers only the identified property

Question 7

Vendors Lien

Answer 7

a lien belonging to a vendor for unpaid purchase price of the property, such as mortgage, beyond the personal obligations of the purchaser.

Question 8

Priority Lien

Answer 8

Order in which claims against the property will be satisfied. First in time first in line. Real estate taxes and special assessments generally take priority over all other liens regardless of the order.

Question 9

Subordination Agreement

Answer 9

Written agreement between lien holders to change priority of mortgage, judgement, and other liens. Holder of a superior or prior lien agrees to permit a junior lien holders interest to move ahead of his lien.

Question 10

Two Types of Real Estate Taxes

Answer 10

1. General Real Estate Taxes/ Ad Valorem Taxes- Based on the value of the property being taxed and are specific, involuntary, statutory liens. Revenue for local government.
2. Special Assessment/ Improvement Taxes-

Question 11

Exceptions from general taxes

Answer 11

• City, state, and federal government
• Municipal organizations (schools, parks, and playgrounds)
• Religious and charitable institutions
• Hospitals
• Educational institutes

Question 12

Assessment

Answer 12

Official valuation process to determine real estate value for tax purposes. It is based on the sales price of comparable properties.

Question 13

Equalization Factor

Answer 13

It is used to correct general inequalities in statewide tax assessments . It is used to achieve uniformity. It can raise or lower assessments in a particular district or country. . Assessed value x equalization factor then the tax rate is applied to the equalized assessment.

Question 14

Tax Rates

Answer 14

• adaptation of a budget for the fiscal year January through December
• Appropriation: the way a taxing body authorizes the expenditure of funds and provides for the sources of funding
• Amount to be raised from the general tax is then imposed by on property owners through a tax levy (vote)
• A tax rate for each individual taxing body is computed separately to arrive at the tax rate.
• Mill is 1/1,000 of a dollar
• taxes may be payable in 2 installments, 4 installments, or 12 installments

Question 15

Tax Sale

Answer 15

Delinquent real estate taxes are collected through a tax sale. Bid off property. Some sates allow redemption after the tax sale- defaulted owner may redeem the property. by paying the amount collected at the tax sale plus interest and charges (statutory right to redemption).

Question 16

Special Assessments

Answer 16

Special taxes on real estate to fund public improvements to the property. Properties benefit directly from the improvement. EX) construction of paved streets, curbs, gutters… Generally paid in equal annual installments over a period of years (5-10). Interest due on the balance of the assessment.

Question 17

Mortgage Lien

Answer 17

Specific, voluntary lien on real estate given to a lender by a borrower as security for a mortgage loan.

Question 18

Mechanic Lien

Answer 18

specific, involuntary lien that gives security to those who perform labor or furnish material to improve real property. For when an owner has not fully paid for the work. In PA under the Mechanics Lien Law contractors or subcontractors can file a claim with the court of common pleas in the country in which the property in located within 6 months after the work is completed. 2 years to enforce the lien.

Question 19

Title can be protected from mechanics liens in several ways…

Answer 19

• A waiver of liens can be included in the construction contract to protect the title from liens being filed by general contractor. (does not protect against liens filed by sub contractors)
• Stipulation against liens can be filed in the prothonotary office to protect the title from subcontractors liens.
• A release of liens can be signed by everyone who has furnished material or labor after work is completed.
• A notice of non responsibility can be posted on the property and recorded public record by the property owner. Used when a third party such as a tenant orders improvements.

Question 20

Judgements

Answer 20

decree issued by court. General involuntary lien on Both real and personal property owned by the debtor.

Question 21

Attachment

Answer 21

prevents a defendant from conveying real estate before completion of suit in which a judgement is sought.

Question 22

Lis Pendens

Answer 22

Special notice when a suit is filed. Notice of possible liens (judgement) after court trial. It notifies all interested parties because the title will be affected.

Question 23

Commercial real estate broker lien act

Answer 23

specific and involuntary lien. Broker files for payment of services rendered. Only for commercial real estate transactions. 90 days after the buyer takes title or leases.

Question 24

Domestic Support Lien

Answer 24

Involuntary liens that may be filed on all real estate owned by a person who has overdue child support obligations.

Question 25

IRS Tax Liens

Answer 25

General liens against the property of a person who has failed to pay IRS taxes

Question 26

Federal Estate Taxes and State Inheritance Taxes

Answer 26

General lien statutory involuntary against a deceased owner’s property

Question 27

Corporation Franchise Tax Liens

Answer 27

General statutory involuntary lien against against a corporations assets.

Question 28

Municipal Utility Liens

Answer 28

Municipalities often have the right to impose a specific equitable involuntary line on the property of an owner who refuses to pay bills for municipal utility services

Question 29

Bail Bond Liens

Answer 29

Form bail in the form of real estate instead of cash. Specific voluntary lien. If the accused fails to appear in court the lien may be enforced by the sheriff or court order.