Lien
A charge or claim against a person's property made to enforce the payment of money.
Collateral
Whenever someone borrows money, the lender generally requires security, or something of value that the borrower promises to give the lender if the borrower fails to repay the debt.
Types of Liens
VISE (Voluntary, Involuntary, Statutory, Equitable)
Voluntary Lien
Created intentionally by the property owner's actions, 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 Lien
Created by statute. A real estate tax lien, for example, is created by statute without any action by the property owner.
Equitable Lien
Arises out of common law. A court-ordered judgment that requires a debtor to pay the balance on a delinquent charge account.
General Lien
Affect all property, both real and personal, of a debtor. This includes judgments, estate and inheritance taxes, decedent's debts, corporate franchise taxes, and IRS taxes.
Lien on Real Estate
Attaches to real property at the moment it is filed and recorded.
Lien on Personal Property
Does not attach to a personal property until the personal property is seized.
Specific Liens
Are secured by specific property and affect only that particular property. Includes vendors' liens, mechanics' liens, mortgage liens, real estate tax liens, and liens for special assessments and utilities.
Vendors' Lien
A lien belonging to a vendor (or seller of a property) for the unpaid purchase price of the property, where the vendor or the seller has not taken any other lien or security, such as a mortgage, beyond the personal obligation of the purchaser. In real est
Effects of Liens on Title
A lien might reduce the value of real estate because few buyers will take on the risk of a property that has a lien on it. Once in place, a lien runs with the land and will bind all successive owners until the lien is paid and cleared.
Priority of Liens
Refers to the order in which claims against the property will be satisfied. In general, the rule for priority of the liens is first to record, first in right (priority). Typically, the priority of payment is from the date the liens are recorded in the pub
Exceptions to Priority of Liens
Outstanding real estate taxes and special assessments generally take priority over all other liens and are paid from the proceeds of a court-ordered sale first.
Subordination Agreements
Written agreement between lienholders to change the priority of mortgage, judgment and other liens. The holder of a superior or prior lien agrees to permit a junior lienholder's interest to move ahead of the superior or prior lien.
Real Estate Taxes
Two types: General real estate taxes and special assessment taxes or improvement taxes. Levied against specific parcels of property and automatically become liens on those properties.
General Real Estate Tax
Ad valorem (according to value) - based on the value of the property being taxed and are specific, involuntary statutory liens.
Assessment
Real Estate is valued for tax purposes by county or township assessors or appraisers. Official valuation process.
Assessed Value
Generally based on the sales prices of comparable properties although practices may vary.
Equalization Factor
Used to achieve uniformity in situations necessary to correct inequalities in statewide tax assessments. It may be applied to raise or lower assessments in a particular district or county.
Tax Rate
The process of arriving at a real estate tax rate begins with the adoption of a budget by each taxing district.
A Mil
A Mil is 1/1000 of a dollar, or $0.001.
Tax Sale
Real estate taxes that have remained delinquent for the statutory period can be collected this way.
Equitable Right of Redemption
Delinquent taxpayers can redeem the property any time before the tax sale. The taxpayer exercises this by paying the delinquent taxes plus interest and charges (any court costs or attorney's fees).
Redemption
The bidding at a tax sale is based on the interest rate the defaulted taxpayer would have to pay to redeem the property; that is, the person who bids the lowest redemption rate (the one most beneficial for the taxpayer) becomes the successful bidder.
Certificate of Sale
Given to the highest bidder when that bidder pays the delinquent tax amount in cash. This gives the holder the right to take possession of the property.
Statutory Right of Redemption
Some states grant a period of redemption after the tax sale. In this case, the defaulted owner (or the defaulted owner's creditors) may redeem the property by paying the amount collected at the tax sale plus interest and charges (including any taxes levie
Tax Deed
If the property is not redeemed within the statutory period, the certificate holder can apply for this (AKA: Sherif's Deed).
Special Assessments
Taxes charged on real estate to fund public improvements to the property. Property owners in the improvement area are required to pay for the improvements because their properties benefit directly from them.
Mortgage Lien
Sometimes called a Deed of Trust Lien, is a voluntary, equitable, specific 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.
Judgement
A decree issued by a court. Usually, it is a general, involuntary, equitable lien on both real estate and personal property owned by the debtor.
Money Judgment
When the decree establishes the amount a debtor owes and provides for money to be awarded.
Judgment Lien Priority
Established by one of or a combination of the following: Date the judgment was entered by the court; date the judgment was filed in the recorder's office; or date a writ of execution was issued.
Satisfaction of Judgment
When the property is sold to satisfy a debt, the debtor should demand this legal document.
Lis Pendens
When any suit that affects title to real estate is filed, a special notice is recorded. (Litigation pending)
Attachments
To prevent a debtor from conveying title to such previously unsecured real estate while a court suit is being decided, a creditor may seek a writ of attachment.
Writ of Attachment
A court order against the property of another person that directs the sheriff or other officer of the court to seize or take control of a property. Most arise for payment of an unsecured debt.
Estate Taxes (Inheritance Taxes)
General, statutory, involuntary liens that encumber a deceased person's real and personal property.
IRS Tax Lien
A federal tax lien results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes. Usually, general, statutory, involuntary lien on all real and personal property held by the delinquent taxpayer.