Unit 8
Security
(also referred to as collateral) is something of value that the borrower promises to give the lender if the borrower fails to repay the debt. When the lender's security is in the form of real estate, the security is called a lien.
Tax Lien
A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens.
Tax Sale
A court-ordered sale of real property to raise money to cover delinquent taxes.
Equalization Factor
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.
Specific liens
A lien affecting or attaching only to a certain, specific parcel of land or piece of property. Include vendors' liens, mechanics' liens, mortgage liens, real estate tax liens, and liens for special assessments and utilities
Statutory Lien
A lien imposed on property by statute—a tax lien, for example.
Involuntary Lien
A lien placed on property without the consent of the property owner.
equitable lien
A lien that arises out of common law.
Vendor's Lien
A lien that belongs to a vendor 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.
Bail bond lien.
A real estate owner charged with a crime requiring a trial may post bail in the form of real estate rather than cash. The execution and recording of such a bail bond creates a specific, voluntary lien against the owner's real estate. If the accused fails to appear in court, the lien may be enforced by the sheriff or other court officer.
Lis Pendens
A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either state or federal court.
Ad Valorem Tax
A tax levied according to value; generally used to refer to real estate tax. Also called the general tax.
Special Assessment
A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement like a street or sewer.
There are some notable exceptions to the priority of liens rule
For instance, real estate taxes and special assessments generally take priority over all other liens, regardless of the order in which the liens are recorded. This means that outstanding real estate taxes and special assessments are paid from the proceeds of a court-ordered sale first.
Example of a Tax rate
If a property is assessed for tax purposes at $160,000 in a taxing district with a tax rate of 3% or 30 mills, the tax bill would be $4,800 ($160,000 × 0.03 = $4,800). If an equalization factor is used, the computation with an equalization factor of 120% will be $5,760 ($160,000 × 1.20 = $192,000, then $192,000 × 0.03 = $5,760).
Priority of liens
In general, the rule for priority of liens is first to record, first in right (priority)
Municipal utility liens
Municipalities often have the right to impose a specific, equitable, involuntary lien on the property of an owner who refuses to pay bills for municipal utility services.
Mill
One-tenth of one cent. Some states use a mill rate to compute real estate taxes; for example, a rate of 52 mills would be $0.052 tax for each dollar of assessed valuation of a propert
Corporate franchise tax
State governments generally levy a corporation franchise tax on corporations as a condition of allowing them to do business in the state. Such a tax is a general, statutory, involuntary lien on all real and personal property owned by the corporation is encumbered by this lien.
Attachment
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.
Which of the following may become a lien on real estate? A) Domestic support order B) A restrictive covenant C) An encroachment D) An easement
The answer is domestic support order. Domestic support liens are involuntary liens that may be filed on all real estate owned by a person who has overdue child support obligations. Lien priority is determined by the date that each support payment (which makes up the lien) becomes overdue.
A person has defaulted in the payment of several debts, and the court has ordered the person's property sold to satisfy the outstanding debts. A title search revealed several outstanding liens against the property. Which of the following liens has first priority? A) The outstanding first mortgage lien dated and recorded one year ago B) The current year's real estate tax lien C) The judgment lien rendered and recorded last month D) The mechanic's lien for work started two months before the mortgage was recorded
The answer is the current year's real estate tax lien. In general, the rule for priority of liens is first to record, first in right (priority); however, real estate taxes and special assessments generally take priority over all other liens, regardless of the order in which the liens are recorded.
In what time frame, if any, is a Pennsylvania contractor permitted to file a mechanic's lien? A) Within six months of completing the work B) Anytime before the transfer of title C) Up to one year after beginning the work D) Within six months of starting the work
The answer is within six months of completing the work. Under the Pennsylvania Mechanic's Lien Law, a contractor or subcontractor can file a claim with the court of common pleas in the county in which the property is located within six months after the work is completed.
A lien is always a monetary charge against the property. true or False?
The statement is true. A lien is a charge or claim against a person's property made to enforce the payment of money.
Domestic support liens are voluntary liens that may be filed on the personal residence owned by a person who has overdue child support obligations. True or False?
This statement is false. Domestic support liens are involuntary liens that may be filed on all real estate owned by a person who has overdue child support obligations. These liens are authorized by Pennsylvania's Domestic Relations Code. The amendments provide that overdue child support obligations existing as of January 1, 1998, constitute a lien on real property owned by the obligor within the judicial district where the overdue support is owed.
nder the Pennsylvania Mechanic's Lien Law,
a contractor or subcontractor can file a claim with the court of common pleas in the county in which the property is located within six months after the work is completed
Domestic support liens
re involuntary liens that may be filed on all real estate owned by a person who has overdue child support obligations.
If the assessment is determined by the front-footage method
t becomes a lien from the date the lien is filed
A specific parcel of real estate has a market value of $180,000 and is assessed for tax purposes at 25% of market value. The tax rate for the county in which the property is located is 30 mills. The tax bill will be A) $650. B) $1,350. C) $900. D) $450.
The answer is $1,350. Market value ($180,000) times the tax ratio (25%) equals the assessed value ($45,000). A tax rate of 30 mills is expressed as 0.030. Therefore, $45,000 × 0.030 equals a tax bill of $1,350.
Which of the following liens does NOT need to be recorded to be valid? A) Mortgage lien B) Real estate tax lien C) Mechanic's lien D) Judgment lien
The answer is real estate tax lien. The annual taxes levied on real estate usually have priority over previously recorded liens, and they may be enforced by a court-ordered sale.
Assessment
The imposition of a tax, charge, or levy, usually according to established rates.
General liens
The right of a creditor to have all of a debtor's property—both real and personal—sold to satisfy a debt.These include judgments, estate and inheritance taxes, decedent's debts, corporation franchise taxes, and Internal Revenue Service taxes
There are two types of real estate taxes:
general real estate taxes (also called ad valorem taxes) and special assessments or improvement taxes
Federal estate taxes and stateinheritance taxes (as well as the debts of deceased persons)These liens are
general, statutory, involuntary liens that encumber a decedent's real and personal property. These taxes and debts are normally paid or cleared in probate court proceedings.
ennsylvania law requires counties and municipal governments to adopt budgets and set tax rates
on a January-to-December calendar year
Most school districts in Pennsylvania, however, are required to
prepare budgets and set tax rates on a fiscal year that begins July 1.
Mortgage Lien
A lien or charge on the property of a mortgagor that secures the underlying debt obligations.
Voluntary Lien
A lien placed on property with the knowledge and consent of the property owner.
mechanic's lien
A statutory lien created in favor of contractors, laborers, and materialmen who have performed work or furnished materials in the erection or repair of a building.
Subordination Agreement
A written agreement between holders of liens on a property that changes the priority of mortgage, judgment, and other liens under certain circumstances.
When a lien against a parcel of real estate may result from a lawsuit currently before the court, a person examining the public records would look for A) a lis pendens. B) the chain of title. C) a judgment lien. D) a suit to quiet title.
The answer is a lis pendens. When any suit is filed that affects title to real estate, a special notice, known as a lis pendens (Latin for litigation pending) is recorded. A lis pendens is not itself a lien, but rather a notice of a possible future lien.
What type of lien is a court-ordered judgment entered against the real property owned by the debtor requiring the debtor to pay the balance on a delinquent charge account? A) Statutory lien B) Equitable lien C) Voluntary lien D) Mechanic's lien
The answer is equitable lien. An equitable lien arises out of common law. A court-ordered judgment that requires a debtor to pay the balance on a delinquent charge account would be an involuntary, equitable lien on the debtor's real estate.
Equitable Right Of Redemption
The right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges.
A subcontractor can file a claim with the court of common pleas in the county in which the property is located within six months after the work is completed. True or False?
This statement is true. Under the Pennsylvania Mechanic's Lien Law, a contractor or subcontractor can file a claim with the court of common pleas in the county in which the property is located. This must be done within six months after the work is completed.
A commercial real estate broker lien
a specific, involuntary lien filed against a property involved in a commercial real estate transaction. The Commercial Real Estate Broker Lien Act enables licensed real estate brokers (not their associate brokers or salespersons) to file a lien for payment of services rendered.
Real estate property taxes
are a favored source of revenue for local governments because real estate cannot be hidden and is relatively easy to value. Property taxes pay for a wide range of governmental services and programs.
Pennsylvania law requires counties and municipal governments to adopt budgets and to set tax rates on a A) August-to-September calendar year. B) July-to-June fiscal year. C) April 16-to-April 15 calendar year. D) January-to-December calendar year.
The answer is January-to-December calendar year. Pennsylvania law requires counties and municipal governments to adopt budgets and set tax rates on a January-to-December calendar year. Most school districts in Pennsylvania, however, are required to prepare budgets and set tax rates on a fiscal year that begins July 1.
What is the difference between a general and a specific lien? A) A specific lien covers real estate, while a general lien covers personal property. B) A general lien cannot be enforced in court, while a specific lien can be enforced. C) One person holds a specific lien, while a general lien is held by at least two persons. D) A general lien covers all of the debtor's property, while a specific lien covers only a certain piece of real property.
The answer is a general lien covers all of the debtor's property, while a specific lien covers only a certain piece of real property. General liens affect all property, both real and personal, of a debtor while specific liens are secured by a specific parcel of real estate and affect only that particular property.
A seller sold a buyer a parcel of real estate. Title has passed, but to date the buyer has not paid the purchase price in full, as originally agreed. To force payment, the seller should seek A) a mechanic's lien. B) a lis pendens. C) a judgment. D) an attachment.
The answer is a judgment. The seller of the real estate can sue the purchaser in court. If the suit is successful, the court issues a decree establishing the amount the debtor owes and provides for money to be awarded. This decree is known as a money judgment.
A general contractor will soon file a suit against a homeowner for nonpayment. The contractor just learned that the homeowner has listed the property for sale with a real estate broker. In this situation, to protect the contractor's interest, the contractor's attorney will use A) a lis pendens. B) a buyer's lien. C) an assessment. D) a seller's lien.
The answer is a lis pendens. The general contractor would protect his interest or claim by recording a notice of lis pendens (litigation pending). This serves as notice of a possible future lien against the property.
When a company furnishes materials for the construction of a house and is subsequently not paid, it may file A) a deficiency judgment. B) a mechanic's lien. C) a lis pendens. D) an estoppel certificate.
The answer is a mechanic's lien. A mechanic's lien is available to contractors, subcontractors, architects, equipment lessors, surveyors, laborers, and others when the owner has not fully paid for the work or when the general contractor has been compensated but has not paid the subcontractors or suppliers of materials.
The property owners on whose land the city recently installed sidewalks will pay for these sidewalks through A) a municipal utility lien. B) monthly billings. C) a special assessment. D) an ad valorem tax.
The answer is a special assessment. Special assessments are special taxes levied to fund public improvements that benefit the property; such taxes can pay for the installation of paved streets, curbs, gutters, sidewalks, storm sewers, and street lighting.
Taxes levied for the operation of the government are called A) improvement taxes. B) special assessments. C) ad valorem taxes. D) assessment taxes.
The answer is ad valorem taxes. General real estate taxes are levied and assessed according to the value of the property subject to taxation. Ad valorem is the Latin term for according to value.
Which of the following is most likely subject to real estate taxes? A) A public golf course B) A community church C) A medical research facility D) An apartment building
The answer is an apartment building. In Pennsylvania, the general theory is that property used for certain public purposes is tax exempt. Apartment buildings owned by private individuals or entities are generally not exempt from real estate taxes.
A lumber company that furnished materials ordered by the property owner was not paid for the materials. What recourse is available to the lumber company in Pennsylvania? A) File a mechanic's lien within one year of date of delivery B) File a mechanic's lien within six months after the work was completed C) No recourse D) File a lis pendens as soon as the material is delivered
The answer is file a mechanic's lien within six months after the work was completed. Under the Pennsylvania Mechanic's Lien Law, a contractor or subcontractor can file a claim with the court of common pleas in the county in which the property is located within six months after the work is completed (entitlement to a lien is subject to certain exceptions and compliance with procedures for serving notice on the property owner).
Which of the following BEST refers to the type of lien that affects all real and personal property of a debtor? A) General lien B) Involuntary lien C) Voluntary lien D) Specific lien
The answer is general lien. The terms voluntary and involuntary refer to the manner in which a lien is created, not what property the lien affects. Specific liens affect only one particular property. A general lien affects all property, real and personal, owned by a debtor.
How is the priority of general liens normally determined? A) By size of the claim B) In the order in which they are filed or recorded C) By the court D) In the order in which the cause of action arose
The answer is in the order in which they are filed or recorded. Priority of liens refers to the order in which claims against the property will be satisfied. The priority of payment is from the date the liens are recorded in the public records of the county in which the property is located.
Under which of the following types of liens can both the real property and the personal property of the debtor be sold to pay the debt? A) Mechanic's lien B) Judgment lien C) Real estate tax lien D) Assessment lien
The answer is judgment lien. A judgment is a decree issued by a court, and when filed, a judgment becomes a general, involuntary lien on both real and personal property owned by the debtor.
Which of the following is classified as a general lien? A) Bail bond lien B) Ad valorem real estate taxes C) Judgment D) Mechanic's lien
The answer is judgment. A judgment is a decree issued by a court that becomes a general, involuntary lien on both real and personal property owned by the debtor.
What is an example of a voluntary lien? A) Real estate tax lien B) Special assessment lien C) Mortgage lien D) Judgment lien
The answer is mortgage lien. The owner of the property who borrows money voluntarily uses the property as collateral.
Priority of liens refers to the A) dates that liens are filed for record; the lien with the earliest recording date will always take priority over other liens. B) order in which a debtor assumes responsibility for payment of obligations. C) order in which liens will be paid if property is sold by court order to satisfy a debt. D) fact that specific liens have greater priority than general liens.
The answer is order in which liens will be paid if property is sold by court order to satisfy a debt. Priority refers to the order in which claims against the property will be satisfied. While the general rule is "first in time is first in line," there are exceptions. For example, a real estate tax lien would take priority over a previously recorded lien for an unpaid debt.
In disbursing funds from a foreclosure sale, the highest priority is usually be given to A) a mechanic's lien for work started before the mortgage was made. B) a judgment rendered the day before foreclosure. C) real estate taxes due. D) a mortgage dated last year.
The answer is real estate taxes due. If a property is sold at a foreclosure proceeding, outstanding real estate taxes and special assessments will be paid first. Tax liens take priority over other liens.
The cost of public services is distributed among real estate owners through A) real property tax. B) sales tax. C) personal property tax. D) special assessment
The answer is real property tax. Municipalities and other taxing bodies fund the cost of public services by levying taxes on real property. These are commonly known as ad valorem taxes because the amount is based on the value of the property being taxed.
A mechanic's lien claim arises when a general contractor has performed work or provided material to improve a parcel of real estate on the owner's order and the work has not been paid for. Such a contractor has a right to A) tear out the work. B) have personal property of the owner sold to satisfy the lien. C) record a notice of the lien. D) record a notice of the lien and file a court suit within the time required by state law.
The answer is record a notice of the lien and file a court suit within the time required by state law. In Pennsylvania, a contractor can record a notice of the lien and enforce the lien by court action (a foreclosure) to collect the debt from the sale of the real estate.
A lien on real estate made to secure payment for specific municipal improvements to a parcel of real estate is A) a utility lien. B) a mechanic's lien. C) an ad valorem tax. D) a special assessment.
The answer is special assessment. Municipal improvements that benefit particular parcels of property are funded by special assessments levied against those properties.
What encumbrance against real property is ALWAYS monetary? A) Easement in gross B) Encroachment C) Tax lien D) Easement appurtenant
The answer is tax lien. A lien is a charge or claim against a person's property made to enforce the payment of money. Easements and encroachments affect the use but are not monetary.
Judgment
The formal decision of a court upon the respective rights and claims of the parties to an action or suit. After a judgment has been entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant.
Specific liens affect all property, both real and personal, of a debtor. True or False?
The statement is false. Specific liens are secured by a specific parcel of real estate and affect only that particular property. General liens affect both real and personal property of a debtor.
Pennsylvania law requires counties and municipal governments to adopt budgets and set tax rates on a January-to-December calendar year. True or False?
The statement is true. Pennsylvania law requires counties and municipal governments to adopt budgets and set tax rates on a January-to-December calendar year. Most school districts in Pennsylvania are required to prepare budgets and set tax rates on a fiscal year that begins July 1.
The annual taxes levied on real estate usually have priority over previously recorded liens. True or False?
The statement is true. The annual taxes levied on real estate usually have priority over previously recorded liens, so they may be enforced by a court-ordered sale.
Internal Revenue Service (IRS),An IRS lien results from
a person's failure to pay any portion of federal taxes, such as income and withholding taxes
lien
is a charge or claim against a person's property made to enforce the payment of money. Whenever someone borrows money, the lender generally requires some form of security
If the assessment is determined by the benefit method
it becomes a lien from the date the taxing authority determines an assessment of benefits.