4 Encumbrances & Liens
Is a lien always an encumbrance? Is an encumbrance always a lien?
A lien is always an encumbrance, a financial encumbrance, but not all encumbrances are liens - think of an HOA CC&R's.
That same neighbor failed to pay their contractor for modifying the shed roof leading the contractor to file a mechanics lien against the property. Should the owner try and sell the house without first terminating that encumbrance, what will appear during a title search?
A lien would show up as an encumbrance and would need to be satisfied before the deed could transfer freely, or the title insurance company would not put insurance on the property.
What negative effects can an encumbrance have on a property's value?
Encumbrance is something that could affect the transferability of the property but is not always a negative, but, like a lien or a HOA, some owners don't want these types of encumbrances and so it is harder to sell or convey.
A neighbor builds a new roof for their pool shed and it overhangs into your property. Why would it be considered wise to enforce your legal rights to have the shed roof modified in a timely fashion?
Failure to asserts one's rights in a timely fashion lessons the ability to enforce rules in the future this is known as latches.
The IRS has the power to lien both personal and real property. This is what type of encumbrance?
General, Involuntary, Statutory
Who can file a Mechanics Lien in Arizona?
In Arizona, it is legal for either a general contractor or a subcontractor to file a mechanics lien.
Give one example of how an easement can be ended...
Non-Use Eminent Destruction abandoned By law
Liens are paid first in time, first in line with two exceptions. What is one of these exceptions?
Property Taxes and Government Liens are always paid before anyone else.
Who is the Lienee? Who is the Lienor?
The Lienor is the "giv-or" of the lien, or the person who is owed money while the Lienee is the "receiv-ee" of the lien and owes that money
A property owner fails to pay their real estate property taxes and a statutory lien is place on the property. What type of encumbrance is this?
This is a monetary, judicial, involuntary lien.
Give one example of how an easement can be created...
Voluntary, By Law, By Prescription, By Necessity or in some cases by continuous use
HOA's may not be able to enforce the illegal paint color change on a property that was sold 2 years ago due to what? Select one: a.Fault b.Languish c.Latches d.Statute of Limitations
c.Latches
What is the difference between Deed Restrictions and CC&Rs?
A deed restriction is something written into the deed that restricts someone from doing something, like building a two story home or more common, accessing minerals, oil or gold below the ground (those mineral rights are restricted and retained by the previous owners). For the CC&R's, these conditions, covenants and Restrictions effect every house or property in the entire community.
When would an owner voluntarily agree to have a lien placed on their property?
A: When the owner needs a mortgage, deed of trust or otherwise wants to allow someone voluntarily to lien the property usually to borrow against.
Give an example of a type of Deed Restriction...
Deed restrictions could be made by owner/developer/CCR etc. A building height, land use, ownership of minerals, property use types, type of construction material used, these are all types of Deed Restrictions.
If a preliminary title search reveals a Cloud on Title and the encumbrance is not satisfied by the seller, what will the title company NOT be able to provide? How will this effect a buyer's ability to secure a loan?
If a lien or encumbrance is found, it is made evident to all parties and the seller or owner of the lien has the right to satisfy the lien/encumbrance. If the lien isn't satisfied, the escrow company most likely won't offer a title insurance policy for the buyer.
Does a notice have to be given to the owner/entity that the mechanic's lien is being placed on? If so, how much notice?
Yes, a 20-day notice must be given to the owner, general contractor, or lender, prior to the lien being filed (Actual Notice Given).
Can a lien be applied for multiple reasons?
Yes, for example Judgement Liens, Income Tax Liens, and Deceased Estate Liens.
Which of the following would most likely hinder the transfer of clear title to a property in a community? Select one: a.A homeowners back tax lien b.Cities special assessments c.HOA CCR's d.Utility Company Easement
a.A homeowners back tax lien
HOA CC&R's are considered an: Select one: a.Encumbrance b.Entitlement c.Escheat d.Easement
a.Encumbrance
The IRS has the power to lien both personal and real property. This is what type of encumbrance? Select one: a.General, Involuntary, Statutory b.Specific but involuntary c.General but involuntary d.General, specific, involuntary
a.General, Involuntary, Statutory
CC&R violations discovered by an escrow company would be? Select one: a.Voluntary Cloud on Title b.Encumbrance c.Adverse Claim on Title d.General Lien
b.Encumbrance
A buyer moves into their new home then are served by papers to pay a lien from a previous contractor that worked on the house 2 years ago. What should the owner do? Select one: a.Pay the lien immediately b.Refer this to their title insurance policy c.Arbitrate through the Board of Contractors in Arizona d.File a delay of action in court
b.Refer this to their title insurance policy
A non-court ordered easement by prescription must be __________, __________ and ___________ to be legally recognized? Select one: a.Visible, Recorded and Acknowledged b.Visible, Open and Notorious c.Open, Official and Recognized d.Legal, allowed and recognized
b.Visible, Open and Notorious
An Easement is what type of encumbrance? Select one: a.Beneficial to all b.Voluntary or Involuntary c.Involuntary d.Voluntary
b.Voluntary or Involuntary
An HOA can foreclose for failure to pay dues or assessments but the minimum owed must be at least how much? Select one: a.$900 b.$500 c.$1200 d.$280
c.$1200
A title policy underwriter discovers a defect in the chain of title and they can't seem to find where a previous owner ever signed the deed to the current owner. This defect would cause what potential action? Select one: a.A title policy could be issued but would have a defect note b.The new buyers of the property would need to clear the defect c.A title policy most likely won't be issued d.A cloud was found and can be easily cleared by the title company
c.A title policy most likely won't be issued
A neighbor's trees are hanging over the fence line in the backyard. The offended homeowner has complained to the HOA but they can't help as this is not an HOA issue. The HOA referred the owner to file a complaint against the neighbor due to what action? Select one: a.Involuntary Alienation b.Agreement Violation c.Encroachment d.CC&R Violation
c.Encroachment
Property taxes, mechanics lien, mortgage lien; which comes first? Select one: a.None, IRS liens come first b.Mortgage LIen c.Property Taxes d.Mechanics Lien
c.Property Taxes
An Easement is what type of encumbrance? Select one: a.Involuntary b.Voluntary c.Voluntary or Involuntary d.Beneficial to all
c.Voluntary or Involuntary
Which of the following would most likely hinder the transfer of clear title to a property in a community? Select one: a.HOA CCR's b.Cities special assessments c.Utility Company Easement d.A homeowners back tax lien
d.A homeowners back tax lien
A title policy underwriter discovers a defect in the chain of title and they can't seem to find where a previous owner ever signed the deed to the current owner. This defect would cause what potential action? Select one: a.A title policy could be issued but would have a defect note b.The new buyers of the property would need to clear the defect c.A cloud was found and can be easily cleared by the title company d.A title policy most likely won't be issued
d.A title policy most likely won't be issued
Landlocked property must be granted an easement and is known as the: Select one: a.Dormant Tenement b.Divisive Tenement c.Disputed Tenement d.Dominant Tenement
d.Dominant Tenement
A change in zoning directly across the street would be a potential : Select one: a.Monetary Encumbrance b.Zoning Encumbrance c.Non-Monetary Encumbrance d.Potential Encumbrance
d.Potential Encumbrance
A lumber yard didn't get paid from the framing contractor who was hired by the General Contractor. They have how long to file a lien on the property where the material was used? Select one: a.90 days from the date the work started b.90 days after the invoice was first sent c.90 days from when the material was dropped on the site d.They can't file a lien as a supplier of materials used on a job
d.They can't file a lien as a supplier of materials used on a job