UNIT 8: RE Taxes & Leins

Question 1

Lien

Answer 1

A claim or charge of a creditor or taxing authority against the real property of a debtor that is used as security to ensure repayment of the debt.

Question 2

Voluntary Lien

Answer 2

A lien placed on property with the knowledge and consent of the Property owner.

Created intentionally by the property owner’s action, eg:

• A mortgage loan

Question 3

Involuntary Lien

Answer 3

Not a matter of choice; it is created by law and may either be statutory or equitable.

Question 4

Statutory Lien

Answer 4

Lien created by statute, e.g.

• RE Tax Lien

Question 5

Tax Lien

Answer 5

A charge against property, created by the operation of law.

Tax Liens and assessments take priority over all other liens.

Question 6

Equitable Lien

Answer 6

A lien that arises out of common law. E.g.

• A court-ordered judgment that requires a debtor to pay the balance on a deliquent charge account would be and involuntary, equitable lien on the debtors RE.

Question 7

General Lien

Answer 7

The right of a creditor to have all of a debtor’s property - both REAL and PERSONAL - sold to satisfy a debt.

• Judgments, Estate & Inheritance taxes, decendent’s debts, corporate franchise taxes, IRS Taxes.

A lien attaches to REAL property the moment it is filed and recorded.

A lien does not attach to PERSONAL property until the PERSONAL property is seized.

Question 8

Specific Liens

Answer 8

A lien affecting or attaching only to a certain, specific parcel of land or piece of property. E.g.

• Vendors’ Liens
• Mechanics Liens
• Mortgage Liens
• RE Tax Liens
• Liens for special assessments or utilities

Question 9

Vendors Lien

Answer 9

A lien that belongs to a vendor (or seller) for the unpaid purchase price of land, where the vendor has not taken any other lien or security beyond the personal obligation of the purchaser.

Uncommon and arise out of the use of owner financing to sell the property

Question 10

Subordination Agreements

Answer 10

A written Agreement between holders of liens on a property that changes the priority of mortgage, judgment, and other liens under certain circumstances.

Under a subordination agreement, the holder of a superior or prior lien agrees to permit a junior lienholder’s interest to move ahead of his or her lien.

Question 11

Ad Valorem Tax

Answer 11

The general real estate tax is an ad valorem tax. Ad Valorem is Lating for according to value.

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

They are charged by various government agencies and municipalities.

Question 12

Assessment

Answer 12

The imposition of a tax, charge or levy, usually according to established rates.

Assessors or appriasers value RE for tax purposes

Question 13

Equalization Factor

Answer 13

A factor (number) by which the assessed value of a property is multiplied to arrive at a value for the property that is in line with statewide tax assessments.

The Ad Valorem Tax would be based on this adjusted value.

Question 14

Mill

Answer 14

1/10th of 1 cent or $0.001

Some states use a mill rate to compute RE Taxes’

EX: a rate of 52 mills would be $0.052 tax for each dollar of assessed valuation of a property.

Question 15

Tax Sale

Answer 15

A court-ordered sale of real property to raise money to cover deliquent taxes.

Question 16

Equitable Right of Redemption

Answer 16

The right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges.

Question 17

Redemption

Answer 17

The right of defaulted property owners to recover their property by curing the default even after the sale.

Owner may redeem property by paying the amount collected at the tax sale plus interest and charges.

Known as the STATUTORY RIGHT OF REDEMPTION.

Question 18

Special Assessments

Answer 18

A tax or levy customarily improsed against only those specific parcels or real estate that will benefit from a proposed public improvement like a street or sewer.

Question 19

Mortgage Lien

Answer 19

A lien or charge on the property of a mortgagor that secures the underlying debt obligations

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

It becomes a lien on real property when the lender records the mortgage in the recorder of deeds office in the county where the property is located.

Generally, a first lien and takes priority over all other liens.

Question 20

Mechanics Lien

Answer 20

A specific, involuntary (statutory) lien created in favor of contractors, laborers, and material men who have performed work or furnished materials in the erection or repair of a building.

A contactor can file a claim with the court of common pleas within 6 months after the work is completed.

If claim is successful priority is given as of the date under which the first visible construction begins or as of the date when claim is filed if its alteration of existing building.

A claimant must take steps to enforce the lien within 2 years of filing date.

Question 21

Judgment

Answer 21

The formal decision of a court upon the respective rights and claims of the parties to an action or suit. After a judgement has been entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant.

Question 22

Lis Pendens

Answer 22

A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either state or federal court.

A LIS PENDENS is not itself a lien, but rather a notice of a possible future lien.

Recording a LIS PENDENS notifies all interested parties, such as prospective puchasers and lenders that there is potention claim against the property.

Also established priority for the later lien; the lien is backdated to the recording of the LIS PENDENS

Question 23

Attachment

Answer 23

The act of taking a person’s property into legal custody by writ or other judicial order to hold it available for application to that person’s debt to a creditor.