Chapter 10 Real Estate Taxes and other Liens

currently in Illionis the tax exemption for owners of single family homes, condominiums, cooperatives, and one to six unit apartment buildings

$6,000 or $7,000 Cook County

Mortgage Lien

* voluntary encumbrance, also known as deed of trust lien. a voluntary lien on real estate given to a lender by a borrower as security for a real estate loan.

Under the Mechanics Lein Act notice requirements, a contractor improvements to owner-occupied, single family residence must be give the owner written notice with in :

10 days after recording a lien against any property of the owner. Note: if timely notice is not given and as a result the owner suffers damages before notice given the lien extinguished to the extent of the damages.

In illionis depending on the property is classified, Real property in cook county is assessed based on a sliding scale of percentages of fair market value from

10% to 25%

In other counties other than Cook county real property is assessed at?

33 1/3% of fair market value

In illionis judgment liens are effective for

7 years and maybe renewed for anouther 7 years

Lien

A Right given by law to certain creditors to have thier debt paid out of the property of a defaulting debtor, usually by means of a court sale. Note: All leins are encumbrances, but not all encumbrances are liens. example: mortgage lein, tax lien, mechanics lien. A lien only represents an interest in the property. ( A lien is an encumbrance of the owners title.)

Specific liens can also secure personal property as in

A car to secure payment of a car loan.

Tax lien

A charge against a property, created by operation of law. A lien on real property to secure the payment of taxes.

Specific liens

A claim against a particular property only. Examples: on real estate mechanics' liens, mortgage liens, real estate tax liens, and liens for special assesments and utilites. Associtation liens (HOA) example: one deal things.

General liens

A claim against all property of the owner, both real and personal property. Includes judgments, estate and inheritance taxes, decedents debts, corporate franchise taxes, and Internal revenue service taxes IRS.

Writ of execution

A court order that authorizes and directs the proper officer of the court ( usually the sheriff) to sell the property of defendant as required by the judgment or decree of the court.

Equalization Factor

A factor (number) by which the assessed value of a property is multiplied to arrive at value for the property that is in line with single statewide tax assessments. The Ad valorem this (according to value) tax is based adjusted value.

A lien on real estate differs from a lien on personal property because

A lien attaches to real property at the moment it is filed. A lien does not attach to personal property until the personal property actually is levied on or seized by the sheriff.

Special Assessment

A tax levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement like a street or sewer. AKA improvement taxes

Attachment

A writ of attachment is a court order that directs the sheriff ot another authorized person to retain custody of a property until lawsuit is concluded. Note: The legal process of seizing property to ensure satisfaction of judgment.

Tax deed

An instrument given to a purchaser after the expiration of the redemption rights, or if unwilling or unable to pay taxes after a certain amount of time, the taxing authority will seize properyy and sell it on a tax lien. ( Certificate of sale ) note: Tax sale example: forclosure, the taxing authority uses proceeds from the sale to pay taxes owed.

Statutory requirements for enforcement if tax liens are complex, in illionis the property may be sold in three ways

At an annual tax sale, At a forteiure sale, at a scavenger sale.

Lien Waiver

Collected by the landowner from each contracter of subcontractor to create a continuing record that all lien claimants have released thier lien rights.

In Illionis The Commerical Real Estate Broker Lien Act ( 770 ILC 15) permits:

Commercial sponsoring brokers to place a lien on property into be the amount of the commission they are intitled to receive for leasing, as well as for a sale under written brokerage agreement in the event that are not paid for their services. The lien applies to commerical property only, and it muct be recorded before closing enforceable.

Statutory lien

Created by law, such as a judgment. A real estate tax lien then is an involuntary and statutory lien. Classic examples are Mechanics lien. These liens do not result in court cases.

Assessment

Real estate is valued for tax purposes by country or township assessors or appraisers. Note: A properties assessed value generally is based on the sales prices of comparable properties. Land values may be assesed seperately from buildings or other improvements. An appraisal or evaluation

Priority of leins

Real estate taxes and special assessments generally take prioity over all other liens regaurdless of the order the leins are recorded. Example: Mechanics' liens take priority as provided by state law but never over tax and special assessments liens. (SEE PG 187 for math examples.)

The priority of liens is generally as follows

Real estate taxes and special assessments paid first. The debtor in the first, or senior, lien position is paid next.

Tax sale

Real estate taxes that have remained delinquent for the statutory period can be collected though this process. A court-ordered sale of real property to raise money to cover delinquent taxes. A sale of property, usually at auction, for non-payment of assessed taxes.

In Illionis special assessments are always

Specific and statutory, but they can be either involuntary or voluntary liens.

All liens have two specific traits

The are either Voluntary or involuntary

Lienor

The party placing a clain in the property of another as security for a debt or obligation owed to the party.

Lienee

The party who owns the property upon which the lien has been placed.

Writ of attachment

To prevent a debtor from conveying title to such previously unsecured real estate while a court suit is being decided, a creditor ,may seek for this. By this the court retains custody of the property until the suit concludes. NOTE: Encumbered

Types of Liens

Voluntary lien, Involuntary lien, Statutory lien, Equitable lien, General Lien, Specific lien, Mortgage lien, Mechanics lien, IRS tax Lien.

Lis Pendens

When any suit is filed that affects the title to real estate. A notice that there is and action or lawsuit pending that may adversely affect the title. pending lien that prevents to transfer of property

Ad Valorem

according to value, taxes based upon property value not personal income.

in Illionis The home improvement exemption

allows homeowners who have recently improved thier home, assessed value for up to 4 years, the exemption value is $75,000.

General Real Estate Taxes

are based on the value of the property being taxed. also know as Ad valorem meaning according to value. These taxes are specific, involuntary, and statutory liens.

Special service areas ( SSAs)

are special taxing districts in municipalites that are established by ordinance, often request of developers of new housing, subdivisions, in n order to pass on the costs of the streets, landscaping, water lines and sewer systems to homowners who reside with in the SSA.

Subordination agreements

are written agreements between lienholders to change the priority of mortgage, judgment and other liens. Note: the holder of a superior or prior lien agrees to permit a junior lienholders interest to move ahead of her lien.

Voluntary lien

created intentionally by the property owner's action, such when some one takes out a mortgage loan. A claim that one person has over the property of anouther a security for the payment of a debt. Note: A mortgage is the most common example of.

A lien is a type of

encumbrance

An IRS lien becomes effectiv: from the date of filing or recording

from the date of filing or recording. It does not supersede previously recorded items.

In illionis a judgment becomes a

general lien on all the defendants real property in a county at the time the judgment was recorded.

federal Estate Taxes and state inheritance taxes ( as well as th debts of a decedents) are ?

general, statutory, involuntary liens that "encumber" a deceased person's real and personal property. These are normally paid or cleared in probate court proceedings.

A buyer should insist on a title before closing a real estate transaction why?

if liens are present, the buyer may decide to purchase at a lower price or at better terms. As in require the leins be paid, or refuse to purchase.

Mechanics lien

involuntary, equitable someone works on property that didn't get paid real estate or "real property" file with in 4 months from the date of completion, 2 years to take legal action once filed. note from the first date filed. placed on property for work performed

Judgments

is an order issued by the court hat settles and defines the rights and obligations of the parties to a lawsuit. A decree issued by a court. Examples: Estate and inheritance taxes, municipal utlilites, bail bond liens, corporate franchise taxes, IRS liens

Encumbrance

is any charge or claim that attaches to REAL PROPERTY and lessons its value or impairs its use. ( usually a lien transfers with the title becuase its attached to the property. They are attached to the property because of a debt.) Note: any lien, such as a mortgage, tax, or judgement lien, an easement, a restriction on the use of land, or an outstanding dower right that may diminish the vavlue of the property. *Mortgage lien burden

Equitable lien

is created by court to ensure the payment of a judgment as well as by agreement. Example: A vendors lien, or possessory lien.

A security

is defined as an act where a party joins with others in expectation of making a profit from the efforts of others.

Involuntary lien

is not a matter of choice its created by law. It may be either statutory or equitable. Consists of two reasons you owe taxes on real estate, or law gives your creditor a lien to your property because you failed to pay money you owed.

Appropiation

is the way of taxing body actually authorizes the expenditure of funds and provides for the sources of the funding. Note: after appropriation a property owner's bill is computed by applying the tax rate to the assessed valuation of the property.

in Illionis Senior citizen Assessment freeze

need to be 65, and household income can not exceed $55,000.

Mechanic's liens generally become effective:

on the day on which the work began, the materials were delivered, the work was completed, the contract was signed, the work was ordered, or the dat that the lien was recorded.

Special assessments are usually are due in equal annual installments, plus interest

over a period of 5 to 10 years.

Tax leins and assessments are

priority over all other liens

Liens are claims of creditors or taxing authorites against the

real and personal property of a debtor.

A lien

runs with the land and will bind all successive owners until the lien is paid in full.

In Illionis properties that are totally exempt from paying general real estate taxes include

schools, religious institutions, cemeteries, and charitable insitutions as well as those owned by federal, state, county and local governments. Note: some taxing districts may elect to tax excempt from certian properties with in limits, such as commerical and industrial properties.

General taxes are charged by various government agencies and munidipalites

states, counties, cities, towns, villages, school districts and community colleges, drainage districts, water districts, sanitary districts and parks, forest preserves,recreation and other public use districts.

An owner may lose title to property for nonpayment of

taxes because such tax-delinquent property can be sold at tax sale.

in illionis to be entitled to a mechanics lien,

the person who did the work must have a contract ( Express or implied) with the owner or the owners authorized representive.