Real Estate Law - UNIT ELEVEN - INVOLUNTARY LIENS AND HOMESTEADS

Which is TRUE about a judgment that has been enforced by an execution sale

(a) The buyer receives a certificate of sale. (b) The former owner has a 12-month period of redemption. (c) The sale need not be held at the property being sold.

Which of the following are involuntary liens?

(a)judgment liens (b)attachment liens (c)tax liens

A homestead declaration does NOT protect an owner's equity from

(a)trust deed foreclosure. (b)mechanics' liens. (c)tax liens.

Attachment

An attachment is a prejudgment lien to ensure the availability of property for execution if a judgment is rendered. The attachment is a lien against real property for three years from the date of levy. A hearing must be held, and the court will grant an attachment only if it believes it is necessary to protect the creditor and that the creditor's claim is valid. The defendant can post a bond in lieu of the attachment; an attachment would tie up the property.

Assessments

Assessments are costs associated with an improvement that benefits a property, such as paving a street.

attachment

Attachment is a process by which real or personal property of a defendant in a lawsuit is seized and kept in the custody of the law to satisfy a judgment that the plaintiff hopes to obtain. The attachment is a prejudgment seizure while a case is pending that ensures the availability of property for execution after a judgment is rendered. One effect of an attachment action is that it can expedite the settlement of claims. Attachment is now limited to claims arising from the conduct of a business, trade, or profession. Because attachment is based on the theory that only the amount of the debt, not its existence, is in dispute, attachments are limited to actions rising out of express or implied contracts requiring the payment of money.

Which sequence shows the proper legal order for these events?

Attachment, judgment, execution

Recording and processing of Lis Pendens

Before a lis pendens can be recorded, it must be signed by an attorney or approved by a judge, and all adverse parties must be served with notice. A lis pendens can be expunged (removed from the record) if a court finds that the claimant has not established by a preponderance of evidence the probable validity of the claim.

Declaration of Homestead

California Constitution provides for homestead rights. The purpose of a homestead is to provide a home free from the fear and anxiety that it will be lost to creditors. A declaration of homestead may be recorded by an owner (or lessee under a lease for 30 years or more) to protect the homesteaded property from execution by subsequent judgment creditors.

Commercial property in delinquent status process of redemption

Commercial property, the redemption period is three years. All the rest of the same rules as Real Property still applies to commercial properties

unlicensed contractor rights

Even when an unlicensed contractor performs the work because of fraudulent representations of the owner, the unlicensed contractor cannot sue in California courts for money owed. Not only is the unlicensed contractor unable to sue for the contract price, a person who paid an unlicensed contractor may sue for recovery of amounts paid (Business and Professions Code Section 7031).

General liens

Federal and state tax liens are general liens, and recording determines their priority.

mechanics liens result from contracts

Generally, mechanics' liens result when the owner has contracted for services directly or through an architect, general contractor, or subcontractor (regarded as agents of the owner for the purpose of the lien law). A direct privity of contract or even knowledge by the owner of the specific mechanic is not necessary for a mechanic to have lien rights. In California, workers can file a lien even when their own employer does not file a lien. An unlicensed contractor, however, cannot file a mechanic's lien.

Home owners association liens

Homeowners associations can file liens for unpaid assessments. Assessments that exceed $1,800 and have been delinquent for over one year can be foreclosed. The foreclosure sale is subject to a 90-day right of redemption.

cessation of work time period for lien filing

If a notice of cessation is filed, all contractors other than the prime contractor have 30 days to file their liens, and the prime contractor has 60 days (the same as for notice of completion). An owner who files a notice of completion or cessation must notify the original contractor and any subcontractor who has filed a 20-day preliminary notice, within 10 days of recording the notice. Failure to do so would extend the period to file a lien to 90 days.

Notice of completion rules

If a notice of completion has been filed, all claimants other than the original contractor have 30 days to file their liens. The original contractor (prime contractor) has 60 days after the recording of the notice of completion to file a lien. The notice of completion must be filed within 10 days of completion of work.

vendor/lessor under lease who repairs or improves cannot get protection

If a vendor under a real property sales contract or a lessor under a lease requires the vendee or the lessee to make repairs, improvements, or alterations as a condition of the contract or lease, a notice of nonresponsibility will not offer protection from mechanics' liens.

Cessation of work

If work is stopped and no notice of cessation is filed, all lien claimants have 90 days from cessation of work to file their liens. Cessation is defined as 60 continuous days without any work being conducted.

Involuntary liens vs. voluntary liens

Involuntary liens are imposed by law, as opposed to voluntary liens, which are created by agreement. Involuntary liens include judgment liens, attachment liens, tax liens, and mechanics' liens.

Involuntary Liens

Involuntary liens are liens against real property that are imposed by the law, as opposed to voluntary liens, such as trust deeds, which are the result of agreement. Liens are a charge against real property, and real property can be foreclosed to satisfy liens.

judgment lien length of time

Judgment liens are good for 10 years from the entry of the judgment. Judgment liens based on alimony or child support are good for 10 years from the date of recording.

Federal income tax liens

Liens for federal income tax are general liens and arise when the taxpayer refuses to pay a tax assessment. To have any effect against purchasers or other lienholders, the lien must be recorded.

Property tax and special assessment liens

Liens for property taxes and special assessments are specific liens attaching to the particular property on which they are due.

real property taxes and special assessments

Liens for real property taxes and special assessments are specific priority liens. A tax sale will wipe out trust deeds and mechanics' liens.

State income tax liens

Liens for state taxes are general liens on all property within the state. Recording is required to establish priority over subsequent liens.

mechanic lien verification

Liens must be verified to be recorded. Verification is provided by the mechanic, who swears to the truthfulness of the facts stated. If for religious reasons a mechanic cannot make a public oath, the mechanic will make an affirmation, which is a formal declaration that a statement is true.

Real property tax deferment for disabled and senior citizens

Low-income seniors citizens (62 years of age and older) and disabled people can defer payment of taxes on their residence, in which case the state takes a lien on the property and recovers the taxes plus interest when the owners die or sell the residence.

Enforcing mechanics' liens

Mechanics' liens are enforced through a foreclosure action brought by the lienholder. If they are not satisfied, the property will be sold. The redemption rights from the sale are similar to those in a mortgage foreclosure. If a lienholder fails to commence an action to enforce a mechanic's lien within 90 days, the property owner can petition the court to remove the lien and may recover up to $2,000 for attorney fees.

How mechanics liens apply

Mechanics' liens are specific liens; they apply only to the property for which labor, material, or services were provided. They play an important role in both construction law and consumer law.

Mechanics' liens

Mechanics' liens are specific statutory liens, but they are provided on the basis of equity. That is, improvers of property should have a charge against the property for the value of their improvements; otherwise, owners could receive undeserved enrichment. Mechanics' lien rights are set forth in the California State Constitution are specific statutory liens, but they are provided on the basis of equity. That is, improvers of property should have a charge against the property for the value of their improvements; otherwise, owners could receive undeserved enrichment. Mechanics' lien rights are set forth in the California State Constitution

Notice of execution sale

Notice of an execution sale must be given by: 1. posting notice of the sale on the property for 20 days before the sale, 2. publishing notice of the sale once a week for 20 days in a newspaper of general circulation within the county where the property is located, and 3. mailing notice to anyone who requests notification from the clerk of the court.

Property tax liens and assessment

Property tax liens and assessment liens have equal priority and take priority over all other liens, regardless of purpose or when recorded. Because they are priority liens, a tax sale would wipe out not only junior encumbrances but also purchase-money first trust deeds and mechanics' liens.

Property and assessment liens priority ranking

Property tax liens and assessment liens have equal priority and take priority over all other liens, regardless of purpose or when recorded.Because they are priority liens, a tax sale would wipe out not only junior encumbrances but also purchase-money first trust deeds and mechanics' liens.

Property tax (ad valorem=according to value)

Property taxes are ad valorem taxes in that they are based on property value.

Proposition 13 and property value assessments

Proposition 13, enacted in 1978, provides that the assessed value of real estate be based on the 1975 tax rolls. Property is reassessed upon a purchase by a new owner or other changes of ownership

Proposition 13

Proposition 13, enacted in 1978, provides that the assessed value of real estate be based on the 1975 tax rolls. Property is reassessed upon a purchase by a new owner or other changes of ownership.

Real property in delinquent status process of redemption

Real property on which taxes are delinquent goes on the tax-defaulted property rolls after June 30, at which time a five-year redemption begins. If the property is not redeemed within the five-year period, the tax collector can sell the property to taxing agencies, revenue districts, certain nonprofit organizations, or anyone at public auction. The tax collector must attempt to sell the property within two years. However, as long as the state retains title, the former owner's redemption rights continue. The property may not be sold for less than 50 percent of its market value. The minimum bid must be approved by the board of supervisors. The purchaser at a tax sale receives a tax deed.

Property tax rates and delinquency dates

Real property tax rates are determined on or before September 1. One-half of the tax is due on November 1 and delinquent at 5:00 pm on December 10. The other half is due on February 1 and delinquent at 5:00 pm on April 10.

Special assessments

Special assessments are for public improvements benefiting the property, such as water, sewers, streets, curbs and gutters, etc.

What are special assessments for

Special assessments are for public improvements benefiting the property, such as water, sewers, streets, curbs and gutters, etc.

Which is TRUE of priority of liens?

Tax liens take priority over prior trust deeds.

attachment lien

The attachment lien is in force for three years from the date of levy. The court can extend an attachment lien for an additional two years. The lien can be released by court order, by order of the plaintiff, or by the levying officer.

Redemption rights

The debtor is allowed to redeem the property from an execution sale within 12 months of the sale (three months if the indebtedness was paid in full by the sale proceeds). The debtor can assign the redemption rights to a third party. To redeem, the debtor (or assignee) must pay the sales price plus statutory interest, plus taxes, insurance, repairs, and maintenance that were reasonably necessary for the property.

Homestead exemption only applies to equity in the home

The homestead exemption applies to an owner's equity. If a home had a fair market value of $100,000 and a $10,000 trust deed against it, the homeowner's equity would be $90,000. If the owner filed as a family unit, the homestead exemption would be $100,000. Subsequent judgment creditors could not force the sale of the property because the homestead exemption exceeds the owner's equity.

Homestead exemptions

The homestead exemption is $75,000 for a single person and $100,000 for a family unit. A $175,000 exemption is available for people 65 or older, people who have physical or mental disabilities, and low-income people over the age of 55 ($15,000 or less annual income for a single person and $20,000 or less if married).

Homestead exemption and bankruptcy

The homestead exemption is available in bankruptcy even though a homestead declaration was not filed.

Mechanics lien requirements

The lien also must describe the work of the claimant, describe the property covered by the lien, state who hired the claimant, list the name of the owner or person claiming ownership, include the balance due (an intentional overstatement can invalidate the lien), and allege that the claimant was licensed at all times during her performance.

NOTICE OF NONRESPONSIBILITY

The most common situations are work authorized by tenants or vendees under real property sales contracts. There is often a notice of nonresponsibility posted on stores in shopping centers to protect the owner of the center from liens should the lessee fail to pay contractors.

vendor must file notice of non responsibility for mechanics lien protection

While a vendor under a real property sales contract must file a notice of nonresponsibility to be protected against mechanics' liens, the beneficiary under a trust deed need not post or record notice because any mechanics' liens would be subject to prior interest.

Notice of Non responsibility at commencement of work

Within 10 days of obtaining knowledge of an actual commencement of work, the owner must post a notice of nonresponsibility on the property in a conspicuous place and record a verified copy. Failure to verify has been held to not be a fatal defect (Baker v. Hubbard (1980) 101 C.A.3d 226). Even if a notice is recorded properly, it is ineffective unless it also is posted. If the notice is posted and recorded properly, the owner's interest cannot be liened.

LIS PENDENS

a lis pendens is a notice of a pending lawsuit involving rights concerning real property. When recorded, it is notice to anyone to examine the proceedings because title is in litigation. Any purchaser after the filing takes subject to the adverse claims; however, a lis pendens has no effect on any prior interests.

A notice of a pending lawsuit involving rights in a property is known as

a lis pendens.

Unpaid real estate taxes have a lien priority superior to

both prior judgment liens and prior trust deeds.

A person who unknowingly paid an unlicensed contractor may sue for

both the contract price and recovery of amounts paid.

General Liens and how they apply

general liens, which apply to all of a debtor's property in the county where recorded

Natural disasters and Homestead proceeds

if the homestead is destroyed by fire, the proceeds of the insurance are exempt from creditors' claims for six months. In either case, the money can be reinvested in a new dwelling and a new homestead declaration can be filed.

A stop notice

is a lien on construction funds held by a lender

Which is NOT a specific lien?

judgement lien

All of the following are specific liens EXCEPT

judgment lien

liens for property taxes

liens for property taxes and special assessments are specific liens attaching to the particular property on which they are due. Special assessments are for public improvements benefiting the property, such as water, sewers, streets, curbs and gutters, etc.

The preliminary notice must contain the following:

material to be furnished; the name and address of the potential claimant and the name and address of the person who contracted for the purchase of labor, service, equipment, or material; a description of the job site; and a statement that if the bills are not paid in full, the improved property may be subject to a mechanic's lien.

Which of the following would protect a property owner from mechanic's liens resulting from unauthorized work being done on his or her property?

notice of nonresponsibility

Mechanics' liens are

specific liens.

By filing a valid homestead declaration, the homeowner receives protection against

subsequent unsecured claims by creditors.

The priority of mechanics' liens relate back to

the date on which work actually commenced on the property.

An attachment is a lien for

three years from the date of levy.

A person may have more than one homestead.

true, but only one at a time.

Liens must be ___________ to be recorded.

verified

An order from the court directing the sheriff to seize and sell the debtor's property to satisfy the judgment is called a

writ of execution.

TERMINATION OF JUDGMENT LIENS

1. Expiration of 10 years: 2. Discharge of the debt in bankruptcy 3. Payment and satisfaction

Time Frame For Filing A Mechanics' Lien

1. Preliminary notice — within 20 days of starting work to be fully covered 2.Period for filing lien a.Notice of completion filed Original contractor has 60 days Subcontractors have 30 days b.Notice of cessation file Original contractor has 60 days Subcontractors have 30 days c.No notice filed (completion or cessation) All contractors have 90 days

Lis Pendens protections

A lis pendens, while not a lien, protects claimants from a transfer of property that could affect their interests. Wrongfully recording a lis pendens could subject the recording party to damages for slander of title.

one homestead at a time

A person may have more than one homestead but only one at a time.

To fully protect his or her lien rights, the mechanic should file a

A preliminary notice

notice of completion

A recorded notice filed by an owner that work has been completed, known as a notice of completion, sets the exact time of completion.

stop notice

A stop notice is a notice given for the purpose of stopping, intercepting, or freezing funds that have not yet been paid on a construction project in an attempt to ensure payment.

Writ of execution

A writ of execution is a separate lien on the debtor's property for a period of one year.

A declaration of homestead must include the following:

1. The name of the declared homestead owner (can be both spouses if each owns an interest) 2. A description of the declared homestead 3. A statement that the property is the principal dwelling of the homestead owner and that the homestead owner is residing in the declared homestead at the time the homestead is recorded

The notice of nonresponsibility must contain:

1. a property description, 2. the name of the person giving notice and the nature of that person's interest, 3. the name of the vendee under the contract or tenant, and 4. a statement that the person signing will not be obligated.

Changes of ownership that do not trigger property tax reassessment are:

1. property passing to a surviving spouse or registered domestic partner; 2. transfers to children by sale, gift, or inheritance of a parent's principal residence; and 3. transfers to children by sale, gift, or inheritance of property other than a principal residence (limited to $1,000,000 in assessed valuation to be excluded from reassessment).

Changes of ownership that do not trigger reassessment are

1. property passing to a surviving spouse or registered domestic partner; 2. transfers to children by sale, gift, or inheritance of a parent's principal residence; and 3. transfers to children by sale, gift, or inheritance of property other than a principal residence (limited to $1,000,000 in assessed valuation to be excluded from reassessment).

The debtor is allowed to redeem the property from an execution sale within ___________ of the sale.

12 months

If there is no notice of completion, subcontractors have how many days to file their liens after completion?

90

Homestead declarations do not protect:

A homestead declaration does not protect an owner from voluntary liens, such as trust deeds or from tax liens, mechanics' liens, or homeowners' association assessments. It also does not protect the homesteaded property against judgment creditors whose liens were perfected by recording of the abstract of judgment before the recording of the homestead.

JUDGMENT LIENS

A judgment is a final order of a court. A court's declaration that money is owed does not in itself create a judgment lien against the debtor's property. Recording a certified abstract of the court's judgment with the county recorder creates a general lien on all the debtor's nonexempt real property within the county where the judgment is recorded.Judgment liens apply to property owned by the debtor at the time the judgment is recorded, as well as to postjudgment property acquisitions. While the priority of judgments ordinarily is based on the time of recording, all existing judgments have equal priority as to after-acquired property. A judgment lien applying to after-acquired property is secondary to any purchase money liens against the property.

Serving of preliminary notice

The preliminary notice may be served in person or by first class, registered, or certified mail. It must be sent to the owner, the construction lender, and the prime contractor. If the owner contracted directly with the party filing, no notice need be served on the owner. The lender's copy must contain an estimate of the total price of labor, services, and/or material to be furnished.

Payoff rules in homestead exemption

The proceeds from a creditor's sale of homesteaded property first go to pay off the secured liens ($10,000 first trust deed). Next, the owner receives the amount of the exemption ($75,000) in cash, and the balance, after deducting sale costs, goes to the creditors. The owner has six months to change the cash proceeds into another homesteaded property (the cash cannot be reached by creditors during this period).

The execution sale

The sale must be made at public auction by sheriff's sale in the county where the property is located on a business day between 9:00 am and 5:00 pm. The purchaser at the sale receives a certificate of sale.

Homestead validity

The validity of a homestead can be attacked by the judgment creditor. If the homestead declarant did not actually reside on the property or had no actual interest in the property at the time of filing, the homestead will not be valid. A judgment by itself is not a lien on a homesteaded property. The lien does not attach until levy of execution takes place (Code of Civil Procedure Section 704.950).

termination of mechanics liens

This is a notice to a lender or an owner that a mechanic claimant has not been paid. It is served on the parties (not recorded). To serve a stop notice, the mechanic first must have filed a preliminary notice. A stop notice is a lien on the balance of the funds the lender is holding. It has priority over the lender's use of the funds remaining for completion. While a mechanic's lien could be wiped out by a lender's foreclosing, a stop notice protects the mechanic with a lien on the unexpended funds. Upon receipt of a stop notice, the lender must withhold monies due or to become due in the amount of the claim. If the owner, lender, or prime contractor disputes the validity of the stop notice, a bond in the amount of 125 percent of the amount claimed can be posted; the funds then would be released from the lien.

Homestead validation rules

To be valid, a declaration of homestead must be recorded in the county where the property is located. A homestead is not valid unless it is acknowledged. However, Civil Code Section 1207 provides that a recorded instrument that is otherwise valid gives constructive notice after it has been recorded for one year, notwithstanding any defect in or omission of an acknowledgment.

Homestead declaration filing rules

To file a homestead declaration, the person recording must reside on the property homesteaded. Actual title is not necessary. Besides a lessee on a lease for 30 years or more, a buyer on a real property sales contract also can file a homestead declaration. A homestead can be filed on any property used as a residence (single-family dwelling, apartment building, farm, condominium, cooperative, mobile home, boat, etc.).

Preliminary notice

To prevent secret liens or lien claimants, a preliminary notice must be given before the recording of a mechanic's lien. To fully protect lien rights, the mechanic should file a preliminary notice that the work is subject to lien rights within 20 days of starting work. If the notice is given later, any subsequent liens will cover only the work starting 20 days before filing.

termination of homestead and moving

To terminate a homestead, the owner must either sell the property or file a declaration of abandonment. Moving from the property does not end the homestead.

The homestead exemption is available in bankruptcy even though a homestead declaration was not filed.

True

Purchasing and selling with homestead rights

When a homesteaded property is sold and a new one is purchased immediately, the new homestead rights take priority as of the date of the prior homestead declaration.

Ad valorem is best defined as

according to value

Ad valorem is best defined as

according to value.

A process by which real or personal property of a defendant in a lawsuit is seized and kept in the custody of the law to satisfy a judgment describes a(n)

attachment

Which is an example of a prejudgment lien?

attachment lien