Unit 8 Flashcards
Lien
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.
Encumbrance
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
Voluntary Lien
Created intentionally by the property owners action such as when someone takes out a mortgage loan.
Involuntary Lien
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.
General Liens
Affect all property real and personal of a debtor. Involuntary taxes
Specific Lien
covers only the identified property
Vendors Lien
a lien belonging to a vendor for unpaid purchase price of the property, such as mortgage, beyond the personal obligations of the purchaser.
Priority Lien
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.
Subordination Agreement
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.
Two Types of Real Estate Taxes
- 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.
- Special Assessment/ Improvement Taxes-
Exceptions from general taxes
- City, state, and federal government
- Municipal organizations (schools, parks, and playgrounds)
- Religious and charitable institutions
- Hospitals
- Educational institutes
Assessment
Official valuation process to determine real estate value for tax purposes. It is based on the sales price of comparable properties.
Equalization Factor
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.
Tax Rates
- 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
Tax Sale
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).
Special Assessments
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.
Mortgage Lien
Specific, voluntary lien on real estate given to a lender by a borrower as security for a mortgage loan.
Mechanic Lien
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.
Title can be protected from mechanics liens in several ways…
- 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.
Judgements
decree issued by court. General involuntary lien on Both real and personal property owned by the debtor.
Attachment
prevents a defendant from conveying real estate before completion of suit in which a judgement is sought.
Lis Pendens
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.
Commercial real estate broker lien act
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.
Domestic Support Lien
Involuntary liens that may be filed on all real estate owned by a person who has overdue child support obligations.
IRS Tax Liens
General liens against the property of a person who has failed to pay IRS taxes
Federal Estate Taxes and State Inheritance Taxes
General lien statutory involuntary against a deceased owner’s property
Corporation Franchise Tax Liens
General statutory involuntary lien against against a corporations assets.
Municipal Utility Liens
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
Bail Bond Liens
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.
