Chapter 2 Continued

Real estate taxes

(also referred to as real property tax or ad valorem taxes) and special assessment taxes are liens on property to secure the payment of taxes.

Mechanic Liens

(materialman or laborer liens) are liens claimed by someone who has supplied labor and/or material for improvements, maintenance, or repairs on real estate but has not been paid. In North Carolina, the lien can be filed against the property on which the work or materials was provided any time up to 120 days after the last day the later or material was furnished

Voluntary Judgment Liens

A confession of judgment is when someone who owes money permits judgment to be entered against him or her by written statement without any legal proceedings.

revocable, non-assignable permission to enter another's land for a particular purpose, such as the right to fish or hunt on someone else's property. They terminate at the sale of the property or the death of either the licensee or the licensor.

A license

Which statement about a fee simple absolute estate is FALSE?

A person transferring a fee simple interest can put no limitations on new owners. Even when the current owner holds the property as fee simple absolute, he or she can put limitations on the property that the new owner must follow.

Cooperative

A type of property ownership under which residents have the right to occupy a unit by purchasing stock shares in the corporation that owns the property.

Unit Deed

A unique deed held by a unit owner of a condominium that documents the ownership of that specific unit.

The gas company's easement in gross is a negative easement.

An affirmative easement allows the owner of the easement to do something, while a negative easement forbids something. This is an affirmative easement.

Express Grant:

An easement by express grant means a landowner divides land and includes language in the deed so the seller retains an easement across his former land. This can also be part of the deed transfer or be in a separate document conveying only the easement.

Oscar is looking to buy a low maintenance residence. Which option will NOT give Oscar ownership of real property?

Cooperative - A cooperative sells shares in the co-op, which are personal property. Oscar would have a proprietary lease, but he would not own real property.

By necessity:

Easement by necessity is a special easement that arises if a piece of land would be completely useless without it—even if there's no long-standing apparent use. An easement by necessity is not an automatic right. The burdened property owner must obtain the servient tenement's permission or court order. One of the most common examples is when a piece of land has no access; it is surrounded by other land and so is landlocked.

are nonpossessory interests—claims, limitations, liabilities, or charges—that are attached to real estate. They are called encumbrances since they encumber or burden a real property owner's title. Examples include liens, lis pendens, restrictive covenants, easements, and encroachments.

Encumbrances

A "notice of pending litigation" to inform potential homebuyers that a property is in a pending lawsuit that will affect title to the property is called a writ of attachment.

False

A creditor who files a lien has the right to occupy the property until the lien is repaid.

False

An example of an easement appurtenant would be an easement that grants access across a parcel of land to a public beach.

False

Colin is setting up a trust for his grandchildren. He is the trustor and his grandchildren are trustees.

False

Gina has the right to drive across her neighbor Fred's property to get to her house. Fred cannot prevent Gina from driving across his land. Gina has a negative easement.

False

True or false: Common areas in a condominium are owned by all owner-residents as joint tenants.

False - Each condo co-owner has a separate interest in an individual unit and owns common areas with other residents as tenants in common.

Like a lien, an easement is a nonpossessory interest in real property and is a financial encumbrance.

False - it is a nonpossessory interest but it is a non financial encumbrance.

Gina has an easement to drive across her neighbor Fred's property to get to her house. Who has the servient tenement?

Fred

Easement example

Fred could choose to sell an easement, a right of way, to Gina that allows her to cross his land to access her lot. It's important to note that an easement is a right to cross the land; Fred did not sell Gina the land. If Fred sells his property, the easement appurtenant goes with the land, and Gina would continue to have access to her property.

A lien against all property of a debtor, instead of a particular piece of property

General Lien

Gina has an easement to drive across her neighbor Fred's property to get to her house. Gina's property is known as

Gina's property is called a dominant tenement since it is property that is benefited by an appurtenant easement.

Glen, Ryan, and Pierce co-own property as joint tenants. Pierce sells his share to Grace. What form of co-ownership is this?

Glen and Ryan are joint tenants; Grace is a tenant in common.

Harold wants to help his grandson, Mike, go to college. Harold transfers ownership of some rental property to the boy's mother, Jan, with instructions to use the income from the property to pay for Mike's tuition, room, and board. Select the matching pairs.

Harold - truster Jan - Trustee Mike - beneficiary

Judgment lien

Involuntary (equitable), general

Income tax lien is

Involuntary (statutory), general

Property tax lien is

Involuntary (statutory), specific

A lien that arises by operation of law, without the consent of the property owner is a

Involuntary Lien

Lis Pendens

It is a recorded notice informing all interested parties of the existence of an unresolved lawsuit that affects title to all or part of the property of the defendant. If the subject property is sold after the lis pendens is placed on the county's public record, any court order or lien resulting from the lawsuit will affect the new owner's title to the property.

Trustor Harold makes daughter Jan the trustee of some rental property for the benefit of grandson Mike. Who holds title to the property?

Jan, as trustee, holds the title to the property, although her power is limited by the terms outlined in the trust.

A nonpossessory interest in property, giving a lienholder the right to foreclose if the owner does not pay a debt owed the lienholder.

Lien

nonpossessory interests, which are financial encumbrances. Lienholders can foreclose on property in the event of default, forcing it to be sold so unpaid debt can be paid from the sale proceeds. The most common liens are mortgages, tax liens, mechanics' liens, and judgment liens.

Liens

A recorded notice stating that there is a lawsuit pending that may affect title to the defendant's real estate.

Lis Pendens

SPECIFIC LIENS: Claims against a particular property

Mortgage Real Estate Tax and Special Assessment (or Property tax) NC Mechanic's Commercial Real Estate Broker Lien

Mortgage Liens

Mortgages are written instruments that use specific real property to secure payment of a debt. The debt is created by a note or promissory note, which is a written, legally binding promise to repay a debt. The note creates the debt, and the mortgage secures the payment. The lender holds only a lien against the property, not the actual title, until the loan is repaid. Also called a deed of trust, a mortgage lien is a powerful incentive for an owner to pay.

Mike conveys a life estate to his youngest son Ned for as long as Mike's wife Olive shall live, and then to his son Paul. Ned dies before Olive dies. Now who has the present interest in the estate?

Ned's heirs - A life estate pur autre vie is inheritable. Therefore, if life tenant Ned dies before the measuring life, Olive, dies, the life estate goes to Ned's heirs.

You don't pay a special assessment tax that was imposed to pay for new street lights in your neighborhood because you thought that the existing light was sufficient. Will the city ask your permission to put a lien on your property to cover that assessment?

No. Real estate tax liens on ad valorem and special assessment taxes are involuntary liens against a specific property. They don't need to ask for your permission.

Homestead Exemption

North Carolina law protects homeowners from a total loss in the event of bankruptcy. The homestead exemption allows the homeowner to exempt up to $35,000 ($70,000 for married couples filing jointly) of their home (or any other real or personal property).

Which statement about a life estate is FALSE?

People deeding property to someone cannot take a life estate for themselves. - Grantors can become life tenants of the property they are deeding to someone else. When this happens, the new owner will not have rights of possession until the grantor dies.

are private deed restrictions that limit how land may be used often defined by a developer in the declarations of restrictions master deed.

Restrictive (protective) covenants

Restrictive Covenants

Restrictive (protective) covenants are private deed restrictions that limit how land may be used.

A lien that attaches only to a particular piece of property.

Specific lien

Condominium Declaration

The document that must be filed in the public record when the property is developed as, or converted to, a condominium.

Common Areas

The land and improvements in a condominium or cooperative that all residents use and own as tenants in common, such as the parking lot, hallways, and recreational facilities.

Easements can be classified several ways

They can be public (e.g., for power lines) or private (e.g., for access to a landlocked parcel). They can be put into a deed before a transfer of property occurs or created separately as an agreement between the parties. They can be affirmative, which allows someone to do something (e.g., allowing someone to cross property to reach property with no road access), or negative, which prevents someone from doing something (e.g., forbidding a property owner from damming a small stream that runs through his property if it will deprive property owners downstream of the water).

Ann purchases a home in North Carolina in which the homeowner's association owns the common area. Such an ownership is best described as a

Townhome. The common areas in a townhome in North Carolina are owned by the HOA, compared to a condo development where the common area is owned by all of the unit owners as tenants in common.

Also like a lien, an easement is considered an encumbrance, since it encumbers (burdens) a real property owner's title. Unlike a lien, however, an easement is considered to be a nonfinancial encumbrance.

True

An IRS tax lien is an involuntary, general lien.

True

An easement by condemnation is an example of the government's interest in real property. In this case, the government is condemning someone's property to create an easement, not to gain full ownership. Obtaining property through eminent domain is an example. Generally speaking, an easement by condemnation can be claimed only when it's for the benefit of the general public.

True

Commercial easements in gross are very common in the United States and are most typically held by the government and public utilities for commercial purposes.

True

Dedication: These easements can be formal or informal whereby a property owner grants easement rights to the public. A residential subdivision developer building a playground and allowing it to be used by the public is one such example. They may also be implied in certain situations.

True

Easements can be created voluntarily or involuntarily. When easements are created voluntarily, the parties involved should put the easement in writing. A document granting an easement should be drawn up and signed just like a deed and should be recorded in the public records in the county where the property is located.

True

If there is no foreclosure involved, the lien order paid is usually prioritized as follows: Real and personal property tax liens are paid first. Special assessments taxes are paid next. All other liens are now paid.

True

In North Carolina, if a landowner does not have access to a public road, the owner may acquire a "cartway" over another property owner's land but only if certain conditions are present (i.e., to cut timber, mine, cultivate land, build private cemeteries, or operate industrial/manufacturing sites).

True

In general, most liens take priority (are superior or takes precedence to) over other liens based on the time (day and hour) they were recorded. North Carolina operates on the "pure race system" meaning liens are established in priority by the time they are recorded. An exception to this is a mechanic's liens, which have a priority based on when the work was begun rather than when the lien was recorded.

True

Most liens are prioritized (and thus paid out in foreclosure) in the order they are recorded, but ad valorem property tax liens always have priority, unlike income tax liens whose priority is based on when they were filed. Lower priority liens may get nothing from a foreclosure sale.

True

Party Walls: These agreements are between two adjoining neighbors to construct and use/support the sidewall of each unit. There are a few different legal forms but one method is a party-line running down the middle of the wall with each party having either a cross easement or a tenancy in common.

True

She thought she had enough, but Marcia realized she needed more money to pay for the pool. When she refinances her mortgage to get cash out to pay for the pool, her mortgage lien is voluntary.

True

The IRS may also file a tax lien against deceased persons—called a federal estate tax--that attaches to all real and personal property in the estate until the tax is paid.

True

The North Carolina Commissioner of Revenue can create an involuntary general lien against a taxpayer's real and personal property for overdue state taxes.

True

True or false: A trustor may be an individual or a company. In a land trust, the only asset is real estate.

True

True or false: In a land trust, the only asset is real estate. The beneficiary directs control over the property and has the right to possess it and earn income from it or proceeds from its sale.

True

noncommercial purposes; for example, an easement across a parcel of land that allows access to a public beach. These types of easements called personal easements in gross, generally may not be conveyed or assigned to someone else.

True

For these next few questions, let's walk through a scenario with property owner Marcia. Bucks Construction is building a pool at Marcia's house. Subcontractor Tim comes and digs the hole for the pool, and Bucks does not pay him. Tim can file a mechanic's lien against Marcia.

True - A mechanic's lien can be placed for work done on the property.

Restrictive (protective) covenants are private deed restrictions that limit how land may be used.

True - Restrictive (protective) covenants are private deed restrictions that limit how land may be used. They may restrict the lot size, minimum square footage, the architectural design, or other specifications of single-family housing for example.

Mortgage lien is

Voluntary, specific

In North Carolina, it is a pre-judgment right of a creditor that ensures creditors that the debtor's property will be available to satisfy the debt once the judgment is finalized; A levy on property under a writ of attachment creates an attachment lien on the subject property, which is a lien intended to prevent property transfer pending the outcome of the litigation.

Writ of Attachment or Attachment Lien

Gina has an easement to drive across her neighbor Fred's property to get to her house. Gina sells her house to Kim. Can Kim now drive across Fred's land?

Yes

If you don't pay the general contractor, he can't pay the lumber yard who supplied the wood for the deck. Do you think that the lumber supplier could file a mechanic's lien against your property, too?

Yes

Chris's lottery ticket was only worth $62, so Chris goes on the property and harvests the corn. Assuming that there was not a time frame indicated in the deed where the easement was created, does his easement end?

Yes - The purpose of the easement has expired once Chris harvests the corn. This is an example of termination by expiration of purpose. Chris does not have an easement to go back on the property and plant again next spring.

Chris, a farmer, sold his land to Carmen before his corn crop was ready for harvest. As part of the purchase, Carmen granted Chris an easement to enter the land and harvest the corn. If a hail storm hits the area a week before harvest, destroying the entire corn crop, does Chris's easement end?

Yes - This is an example of destruction or expiration of purpose. The purpose of the easement was to harvest corn; if the corn does not exist, the easement is terminated.

Instead, let's say that Chris hits the lottery for $350 million before he harvests the corn. He calls Carmen and tells her that he has no interest in harvesting the corn. What's the most likely way his easement will be terminated?

abandonment

Sponsor

also known as the developer, is the person, corporation, or other entity that is part of the sale and development of condo property. Sponsors establish a condominium by filing a condominium declaration. They also file bylaws and establish the CC&Rs for the unit owners association.

Special assessment taxes

are taxes levied only against properties that benefit from a public improvement (e.g., a sewer or street light) to cover the cost of the improvement; creates a special assessment lien (an involuntary lien). To be enforceable, the taxes creating the lien must be legitimate, which requires them to be properly levied, used for legal purposes, and equitably applied to all landowners.

Jacob and Jeremy share part of a driveway. To ensure that each can enjoy use of the driveway and share the maintenance costs, they most likely have what type of easement?

easement by agreement

Heather owns a property on the shore. The guest house is on the beach, and the main house is up a hill above the beach. She sells the guest house to Tom. After the sale, she continues to use the gate between the main house and the beach house to cross Tom's property and access the beach. This would most likely be considered

easement by implication. - when a property is divided and the facts and circumstance indicate a prior use that is reasonably necessary

Maria gives a four-acre parcel of land to her church with the caveat that if the church ever puts a parking lot on it, Maria's heirs will regain title. What kind of estate does the church have for this property?

fee simple defeasible

lien

financial interest that someone has in another person's property. It provides a degree of security for a debt and may give the creditor or lienholder the right to foreclose on the debtor's property if the debt isn't paid.

Marcia has four liens: $3,000 for the city-installed curbs, $2,000 for Tim the digger, $150,000 on her mortgage, and $12,000 judgment for credit card debt. The bank forecloses, and the house sells for $152,000. How do you think the money will most likely be distributed?

in order, so $3,000 to the city; $2,000 to the digger; $147,000 to the bank; $0 to the creditor

easement in gross

involves a specific parcel of land and benefits a person or company (called the dominant tenant) not a piece of land. Because these types of easements are not dependent upon ownership of adjoining property, they have no dominant tenement--the burdened land is called a servient tenement.

easement appurtenant

involves two separately deeded parcels that are owned by different parties. This type of easement burdens one piece of land (called the servient tenement) for the benefit of the other piece of land (called the dominant tenement).

easement

is a right to use another person's real property for a particular purpose. An easement is a nonpossessory interest in property that creates limited rights for the easement holder related to the land surface, its airspace, or subsurface

Easement by implication

is created by law when land is divided, and there is a long-standing apparent use reasonably necessary for the enjoyment of the land. This is also called an implied easement.

Which type of co-ownership requires ONLY the unities of possession, interest, time, and title?

joint tenancy

The term "right of survivorship" is associated with a

joint tenancy. The right of survivorship is one of the distinguishing characteristics of joint tenancy. As each successive joint tenant dies, the surviving joint tenants acquire the interest of the deceased joint tenant.

Judgment liens

liens against a person's real and personal property through court action. At the end of a lawsuit, if it is determined that one party owes the other money, a judgment is entered which is enforced by an order called an execution signed by the clerk of court. The winner of the lawsuit (judgment creditor) may claim a lien against the other party's (judgment debtor) real property.

When a trust is established in the trustor's lifetime, it is known as a

living trust (or revocable trust)

Two months later, Marcia is sued for nonpayment of a credit card debt and a judgment lien is recorded against her. What are the current priority positions of the liens in the event she defaults on all of her obligations?

mechanic's lien is first, mortgage lien is second, judgment lien is third

Which is a voluntary, specific lien?

mortgage lien

Which project would LEAST LIKELY justify a special assessment?

new siding on an individual property owner's home is correct - other incorrect options are new curbs on Oak Street, new driveway approaches in the River Bend subdivision, ornamental street lighting in the historic district

Which lien would be paid first in the event of a foreclosure sale?

property tax lien

Albert conveys a life estate to his daughter Charlotte for as long as she lives, and then to his son David. Who is David, and what does he own?

remainderman, future estate

The gas company has an easement in gross to access its gas lines on the

servient tenement. With an easement in gross, the property that is burdened by the easement is called the servient tenement. It is serving the needs of the gas company by letting them dig up the lawn.

The city assesses a specific tax to replace the curbs and lights on Marcia's street, and she ignores the tax bill. The city files a lien. Of the four liens on Marcia's property, which is in first priority?

special assessment tax lien over mortgage lien, mechanics lien and judgment lien

When Jake purchases a house, he gets a mortgage. The mortgage is recorded on May 1. Jake builds a deck in July and then goes to Hawaii for several months. He doesn't pay the contractor or his property taxes. His property goes to foreclosure. Generally speaking, in what order will the liens be paid?

tax lien, mortgage lien, mechanic's lien. - Property tax liens are always paid first. Then liens are generally paid in the order in which they were filed.

Blanche, Rose, and Dorothy co-own a condominium. Dorothy owns a one-half interest in the property, while Blanche and Rose each own a one-fourth share. What is this type of co-ownership?

tenancy in common

A trust established by will or after the death of the trustor is a

testamentary trust - These often contain terms by which assets are left to children at a set time or life event, such as graduation, marriage, or 30th birthday.

Julie is applying to live in Hoity Toity Tower. Assuming no illegal discrimination, she could be rejected if

the co-op board decides not to approve her application. A cooperative board can reject an applicant for any reason unless the rejection is related to the applicant's membership in a protected class.

Siblings Rita, Al, and Paul co-own a family restaurant as joint tenants. If Paul dies without a will, his interest will pass to

the surviving co-owners.