Lien
A charge or claim against a person's property made to enforce the payment of money.
Collateral
Something of value that the borrower promises to give the lender if the borrower fails to repay the debt.
Encumbrance
Any charge or claim that attaches to real property and lessons its value or impairs its use.
Does an encumbrance prevent the transfer or conveyance of property?
No, but because it is attached to the property, it transfers along with it.
Four ways to create a lien:
1. Voluntary
2. Involuntary
3. Statutory
4. Equitable
(VISE)
Voluntary Lien
Created intentionally by the property owner's action, such as when someone takes out a mortgage loan.
Involuntary Lien
Not a matter of choice. Created by law and may be either statutory or equitable.
Statutory Lien
Is created by statute.
Ex: a real estate tax lien is an involuntary, statutory lien. It exists without any action by the property owner.
Equitable Lien
Arises out of common law. A court ordered judgement that requires a debtor to pay the balance on delinquent charge account, and which can be filed in the count where the debtor owns property.
Types of liens according to the type of property involved (2)
1. General liens
2. Specific liens
General Liens
Affect all the property, both real and personal, of a debtor. This includes judgements, estate and inheritance taxes, decedents debts, corporate franchise taxes and IRS taxes.
How does a lien on real estate differ from a lien on personal property?
A lien on real estate is different from a lien on personal property. A lien attaches to real property at the moment it is filed and recorded. In contracts, a lien does not attach to real property until the personal property is seized.
Specific Lien
Secured by specific property and affect only that particular property. Include vendors liens, mechanic's liens, mortgage liens, real estate tax liens, and liens for social 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, such as a mortgage, beyond personal obligation of the purchase.
Uncommon and arise out of the use of owner finan
Priority of liens
The order in which claims against the property will be satisfied if the property is sold by the debtor.
What is the rule of priority liens
Priority is first to record, first in right.
Junior Lien
One that comes after an earlier lien. Can foreclose, but the property will still be subject to the lien or liens with higher priority.
What generally takes priority over all other liens?
Real estate taxes and special assessments, regardless of the order in which the liens were recorded .
Subordination Agreements
Written agreements between lien holders to change the priority of mortgage, judgement, and other liens. Under subordination agreement, the holder of a superior or prior lien agrees to permit a later lien holder's interest to take precedence.
2 Types of Real Estate Taxes
1. General Real Estate Taxes
2. Special Assessments or Improvement Taxes
General Real Estate Tax
A tax that is made up of the taxes levied on the real estate by government agencies and municipalities. It is an ad valorem tax.
Ad Valorem Tax
Latin for "according to value". Based on the value of the property being taxes and are specific, involuntary, statutory liens.
State laws exempt certain real estate from taxation. The most common are real estate owned by: (6)
1. Cities
2. Municipal organizations (schools, parks, playgrounds)
3. State and federal governments
4. Religious and charitable organizations
5. Hospitals
6. Educational institutions
What are some examples of governments offering tax reductions (3)
1. Industies
2. Sports franchises
3. Agricultural Land
Assessment
Official valuation process to determine the value of the real estate for tax purposes.
Assessment equalization factor
Used to correct inequalities and achieve uniformity. 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 state wide tax assessments. The ad valorem tax would be based on this
Tax Levy
The formal action taken to impose the tax, usually by the total assessments of all real estate located within the taxing body's jurisdiction.
Mill
One way in which a tax rate is expressed.
1/1000 of a dollar, or $0.001.
May be expressed as a mill-per-dollar ration: in dollars per thousand.
Ex: a tax rate of .032 or 3.2%, could be expressed as 32 mills or $3.20 per $100 o assessed value, or $32 per $
Tax Bills, how are they computed
By applying the tax rate to the assessed valuation of the property.
How are taxes paid?
In installments. 2 installments (semiannually) or 4 installments (quarterly) or 12 installments (monthly).
Tax Sale of the property
A court-ordered sale of real property to raise money to cover delinquent taxes.
Certificate of sale" in a tax sale of property
Given to the highest bidder when that bidder pays the delinquent tax amount in cash. The certificate of sale gives the holder the right to take possession of the property.
What is a grant of redemption after the tax sale?
Statutory Right of Redemption
The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges.
Equitable Right of Redemption
The right of a defaulted property owner to recover the property before its sale by paying the appropriate fees and charges.
Special Assessment
A tax charged on real estate to fund public improvements to the property, and it creates a lien for the amount of the assessment on the property. Property owners in the improvement area are required to pay for the improvements because their properties ben
Mortgage Lien
A voluntary lien on real estate given to a lender by a borrower as security for a real estate loan.
Mechanic's lien
A specific, involuntary lien that gives security to persons or companies that perform labor or furnish material to improve real property. Filed when the owner has not fully paid for the work or when the general contractor has been compensated, but has not
Notice of non-responsibility
When improvements were not ordered by the property owner have commenced, the property owner should execute this document. It may prevent the filing of a mechanics lien.
Judgement
An involuntary, equitable lien on both real and personal property owned by a debtor.
Only covers the property located within the county in which the judgement was issued.
Writ of Execution
Directs the sheriff to seize and sell as much of the debt's property as necessary to pay both the debt and the expenses of the sale.
Satisfaction of Judgement
Filing that clears the record of the judgement lien.
Lis Pendens
*Not a lien
A notice of possible future lien. Notifies prospective purchasers and lenders that there is a potential claim against the property and establishes a priority for the later lien.
Writ of Attachment
A court order against the property of another person that directs the sheriff or officer of the court to seize or take control of the property. The court retains custody of the property until the suit concludes.
*prevents debtor from conveying title to pr
Estate Taxes and Inheritance Taxes
General, statutory, involuntary liens that encumber a deceased person's real and personal property.
Lien for Municipal Utilities
Municipalities have the right to impose a specific, equitable, involuntary lien on 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 rial may post bail in the form of real estate rather than cash. The execution and recording creates a specific, statutory, voluntary lien against owner of real estate.
Corporate Franchise Tax Lien
State governments generally levy a corporation franchise tax lien on corporations as a condition of allowing them to do business in the state. Tax is general, statutory, involuntary lien on all real and personal property owned by the corporation.
IRS Tax Lien
Results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes.