Encumbrances and title insurance
When a property is foreclosed on, some liens have priority over others and receive funds first. What is the priority of payment?
1. Property tax liens 2. Secured liens/ mechanic's liens 3. Homestead exemption amount 4. Levying officer reimbursement 5. All other liens by filing date 6. Homeowner
A notice of completion has to be filed within ___ days after the work is completed.
10
The contractor or subcontractor must file a preliminary notice with the owner.
20 days of work starting.
Frank has waited 30 days after notifying a client that the project he finished remains unpaid. The client has not filed a notice of completion or cessation with the county clerk. How long does Frank have left to file a mechanic's lien?
60 days
Mechanic's lien is enforced.
90 days after filing lien
General lien
A claim against an individual and all of their property.
Guarantee of title
A examination and guarantee of the condition of a title at the time of thee search made by the title company
What is lis pendens?
A legal notice that a lawsuit is pending that affects the title of a property.
Specific lien
A lien against a single property.
Statutory lien
A lien imposed on property by statute—a tax lien, for example—in contrast to an equitable lien, which arises out of common law.
Subordination agreement
A lienholder will agree to modify the order of priority. Ex. Mortgage lien holder A agreed to modify the order of priority and be paid after mortgage lien holder B.
Constructive notice
A public recordation of an event, meaning notice was published but not necessarily given directly to the affected parties while still technically being available in the public record.
Marketable title
A title that is clear and free of encumbrances.
What's the term for a notice given directly to and received by a person?
Actual notice
The property owner can file a lien release bond if they want to dispute the lien and stop a foreclosure. Allowed or not allowed?
Allowed
The property owner can post and file a notice of nonresponsibility to stop any unauthorized work and claims from occurring. Allowed or not allowed?
Allowed
The property owner can require the contractor to obtain a payment bond. Allowed or not allowed?
Allowed
What's a quiet title action?
An action to locate and notify all who may have some claim on the title, and determine the validity of all claims
What makes an income tax lien different from a property tax lien?
An income tax lien is a general lien and a property tax lien is a specific lien.
Equitable liens
Arise out of fairness or what is equitable and is based on common law. Placed as the result of a court order.
A general, involuntary lien placed against a deceased person's estate if there are unpaid debts to creditors.
Deceased person's debt
Extended coverage
Defects that are part of the standard coverage as well as additional defects. Ex. Incorrect survey and boundary encroachments Unrecorded liens Preexisting zoning violations
Due to a court order, a homeowner is required to pay a specific amount of money to an injured party. The amount owed by the homeowner is an example of an involuntary version of this type of lien on the home.
Equitable Lien
This type of lien does not give the right of possession; it is simply a charge or encumbrance on the property.
Equitable Lien
5 most common title issues
Errors in public record Missing heirs Forgeries Unknown liens Survey or boundary issues
Chain of title
Establishes title history or path and proof of ownership. Must be unbroken for the title to be good or marketable
What type of lien is defined as an involuntary lien placed on all of the property received by a deceased person's heirs?
Estate/inheritance lien
A general, involuntary lien placed on all of the property inherited by a deceased person's heirs.
Estate/inheritance tax lien
Actual notice
Express notice given directly to a person or actual knowledge that is known
Foreclosed owner can still claim title to the property after the trustee's sale. T/F
False
In California, mechanic's liens have priority over all other liens on the property. T/F
False
Lien rights do not survive foreclosure or sale of the property. T/F
False
The document may be of any size and on any type of paper. T/F
False
The right to lien does not extend to material suppliers. T/F
False
Right of Redemption
If the property owner can satisfy liens against the property before the foreclosure has occurred, it can be prevented.
Why is it important that all liens be paid in full before a property is sold to a new owner?
If the property transfers to the new owner and the lien remains unpaid, the unpaid lien can trigger a foreclosure.
A general, involuntary lien the IRS places against a property for due and unpaid taxes.
Income tax lien
Deceased person's debt. Voluntary or involuntary?
Involuntary
Estate and inheritance tax lien. Voluntary or involuntary?
Involuntary
Income tax lien. Voluntary or involuntary?
Involuntary
Judgment lien. Voluntary or involuntary?
Involuntary
Mechanic's lien. Voluntary or involuntary?
Involuntary
Quiet title action
Involves locating a person who may have some claim on the title and obtaining a document from that person to prove that a debt, for instance, has been paid or corrected.
Certificate of title
Is similar to an abstract of title but based on the title company's own previously obtained records of the property held in a title plant
Preliminary report
Issued after title insurance has been ordered and outlines the history of the title and what will be covered by the title insurance policy, if issued.
What does the right of redemption allow?
It allows a property owner to pay back any debts or liens against their property until a foreclosure sale is held.
Karen's house was recently foreclosed on to pay off a lien on her home. What happens to any extra money after the lien and expenses of the sale are paid?
It goes to Karen.
A property is foreclosed upon. The lien has been paid off, and there is some money left over. What happens to the excess money?
It is used to pay the expenses of the sale of the property.
Which of these statements is NOT true about an extended title insurance policy?
It's typically used when the property is paid for in cash.
A general, involuntary lien brought against a property due to a court decree resulting from a lawsuit.
Judgment lien
Joshua won his lawsuit against Savannah. The judge awarded him $30,000. Savannah was unable to pay, so the court placed a ______ on her home.
Judgment lien
A specific, involuntary lien contractors or subcontractors place against a non-paying client's property
Mechanic's lien
A specific, voluntary lien against a single property that uses the property as collateral for repayment of a loan
Mortgage lien
A work contract doesn't allow the contractor to claim a lien on the property. Allowed or not allowed?
Not allowed
Public records
Open to the public Used by buyers to: verify property ownership and identify encumbrances against the property
Homestead
Primary property in which the owner resides
Recordation timing determines what?
Priority. The first to record has priority.
Lender's policy
Protects the lender's interest in the property for the amount of the loan. The value of the policy decreases as the loan is paid down.
Abstract of title
Provides a summary of the chain of title history accompanied by a lawyer's opinion of title (a statement of opinion regarding the validity of the title
A specific, involuntary lien placed against owners who haven't paid their property taxes.
Real property tax lien
Conrad just closed on the house he's buying to fix up. Why should he follow up to be sure the deed has been recorded?
Recording provides constructive notice that he owns the property.
Six-month rule
Rule that defines the period of time homestead exemption funds are safe from creditors before it must be reinvested in a new homestead
Which of these scenarios describes a voluntary lien?
Sharon purchased a condo and now the lender has a mortgage lien on the property.
Which option describes a real property tax lien?
Specific and involuntary
A real property tax lien is an example of an involuntary version of this lien, created without any action required on the part of the property owner.
Statutory Lien
What's it called when lien holders allow another lien holder's claim to have priority over their own?
Subordination agreement
Now assume you have a situation where there's not enough money to pay off all of the lienholders. What can happen to the former owner in this case?
The former owner will lose the property and might owe a debt to the lien holders who are not fully paid off.
Under which of the following circumstances would a mechanic's lien be attached to a property?
The owner fails to pay the builder who added an extra bedroom to the house.
In a typical transaction, which of these title defects is unlikely to cause a problem for the buyer?
The seller's existing mortgage
Paula is bidding on a property that's being sold at a foreclosure auction. She's excited about the great deal she's getting on the property after she finds out she submitted the winning bid. What could cause Paula's great deal to turn into a nightmare?
The title to the property may have hidden issues that could cost her a lot of money to clear.
Equity
The total value of the property, minus the amount owed
Homestead exemption
The value of the property that is exempt from liens by creditors
Title issues can be a problem because:
They can make financing difficult. They put ownership in question. They can make it difficult to resell the property later.
In California, even if the owner has paid the general contractor in full, if the subcontractor were not paid in full, the subcontractor can establish a lien and eventually foreclose on the property. T/F
True
The document must be acknowledged before a notary public. T/F
True
The document must be in writing and properly executed (signed). T/F
True
The name and address of the individual requesting the recording must be legible. T/F
True
The right half of the top first page is reserved for the exclusive use of the recorder. T/F
True
The right to lien extends to subcontractors and sub-subcontractors. T/F
True
California uses a non-judicial foreclosure process which means no court involvement. The property goes though a _________.
Trustee's sale
How long does a homeowner have to pay off outstanding liens against his property?
Until foreclosure sale is held
Subcontractors and material suppliers filing a mechanic's lien must file the lien if the owner has filed a notice of cessation or completion.
Up to 30 days after work ends
Contractors filing a mechanic's lien must file the lien in court if the owner has filed a notice of cessation or completion.
Up to 60 days after work ends
Mechanic's lien claimants must file the lien in court if the owner has not filed a notice of cessation or completion.
Up to 90 days after work ends
Deed
Used to establish ownership. Assurance to buyer that seller has the right to sell the property.
Mortgage lien. Voluntary or involuntary?
Voluntary
Involuntary lien
When a creditor places a claim on real or personal property through legal means without the owner's consent in order to collect an unpaid debt.
Voluntary lien
When an individual agrees to have a security placed against himself or his property.
Standard coverage
Which insures the buyer against defects that may exist but have not been discovered or disclosed as of the time the title is transferred to the buyer. Ex. Forgery or impersonation Errors or omissions in legal descriptions Improperly recorded deeds Prior mortgage or lien
When does the title officially change hands?
With the transfer of the deed from the seller to the buyer.
How long after a notice of cessation or completion is filed can a contractor file a mechanics lien?
Within 60 days
Title insurance policy
insures the policy owner against financial loss if the title to the real estate has defects beyond what is known in the public record