Real Estate Chapter 15 Taxes and liens

Millage breakout for ad valorem taxes is library: 0.5, school 1, school debt services 0.5, community college 1, vocational school 0.5 and all others 5. If property is assessed at 165,000, how much is the tax bill?

- 0.5 + 1 + 0.5 + 1 + 0.5 + 5 = 8.5 mills or $0.0085 per dollar of valuation - 8.5/ 1000 = 0.0085 - 165,000 x 0.0085 = $1,402.50

All these are liens against property except...

- mortgage - real estate taxes - les pendens - home improvement loan of a deceased property owner. *** Les pendens

Market value of undeveloped parcel - 40,000 Its assessed value is 40% of market value Equalization factor of 1.5. Tax rate is $4 per $100, what is the amount of the tax owed on property

-40,000 x 40% = 1.5 - 1.5 / 100 x 4 = $960

IRS Tax Lien

A federal tax lien or Internal Revenue Service - A result from a persons failure to pay any portion of federal taxes, such as income and withholding taxes. A federal tax lien is a general statutory involuntary lien on real and personal property held by the delinquent taxpayer.

Vendors lien

A lien belonging to the vendor (seller) for the unpaid purchase price of the property.

Equitable Lien

A lien created by a court judgment

Equalization

Some jurisdiction when it is necessary to correct inequalities in statewide tax assessments an assessment equalization factor is used to achieve uniformity. May be applied to raise or lower assessments in a particular district or county. The assessed value of each property in the area is multiplied by the equalization factor and the tax rate is then applied to the equalized assessments. Buyer or seller agent is assessing it.

Federal Tax Lien

General statutory and involuntary lien on both real and person property

Lien

A charge or claim against a persons property by a creditor, which is made to enforce the payment of money

Assessed value

A country assessor usually bases a properties assessed value on the sales price of comparable properties.

Writ of attachment

A court order against the property of another person that directs the sheriff to take control of property.

General Lien

A lien that affects all the real and personal property owned by a debtor. This includes judgments, estate and inheritance taxes, decedents, debts, corporate, franchise taxes, and internal revenue service taxes. A lien on real estate differs from a lien on personal property. A lien attaches to real property at the moment it is filed and recorded. A lien does not attach to personal property until personal property is seized.

Specific Lien

A lien that is secured by and only affects certain property of the debtor. Secured by specific property and affect only that particular property . Specific liens on real estate include, vendors lien, mechanics lien, mortgage lien, real estate tax lien and liens for special assessments and utilities.

Lis Pendens

A notice of a possible future lien based on a lawsuit. When any suit that affects title to or possession of real estate is filed a special notice known as a lis pedens is recorded . Notice of possible future lien. Recording a lis pendens is not itself a lien, but rather notice of a possible future lien. Recording a lis pendens notifies prospective purchasers and lenders that there is a potential claim against the property. It also establishes a priority for the later lien. The lien is backdated to the recording date of the lis pendens.

Bail Bond Lien

A real estate owner that is charged with a crime that will result in 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, statutory, voluntary lien against owners real estate. If the accused fails to appear in court, the lien may be enforced by the sheriff or another court officer.

Real Estate Tax lien example

A specific, involuntary, lien

Ad Valorem Tax

A type of tax based on the assessment of the property's value. Tax lien, always statutory. ** General real estate tax. Latin for "according to value" Taxes are based on the value of the property and are specific involuntary statutory liens. Property taxes pay for a wide range of government services and programs including... -states - countries - cities, towns, boroughs, villages - school districts, local elementary, middle and high school, publicly funded junior colleges and community colleges. - drainage districts - hospital districts - water districts - sanitary districts - transportation district - parks, forest preserves, and recreation districts.

Subordination

A written agreement between lienholders to change the priority of a lien Are written agreements between lienholders to change the priority of mortgage, judgment and other liens. Under a subordination agreement the holder of a superior or prior lien agrees to permit a later lienholder interest to take precedence.

Special Assessment T/F

Always specific and statutory lien

Taxes

Charges imposed by state and local governments to fund their functions and services

Tax Rate

Client wants to know. Process of arriving at a real estate tax rate begins with the adoption of a budge by each taxing districts Budget must include an estimate of all expenditures for the year.

Hospital

Exempt from taxation

Effect of lien on title

Existence of a lien does not necessarily prevent a property owner from transferring title to someone else. Lien might reduce value of real estate because buyers don't want to risk it with the lien. Lien attaches to property -once in place a lien runs with land and will bind all successive owners until the lien is paid or settled and title is cleared by the filing of a release of lien by the lien holder.

Estate in inheritance tax lien

Federal estate taxes, and state inheritance taxes ( as well as the debts of decedents) are general statutory, involuntary liens that encumber a deceased persons real and personal property. These taxes and debts are usually paid or cleared in probate court proceedings.

Mechanics Lien

Involuntary - Is a specific, involuntary lien that gives security to persons or companies that perform labor or furnished material to improve real property. lien is available to - - contractors -subcontractors - architects - equipment lessors - surveyors - laborers - and other providers This type of lien is filed 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 supplies of materials.

Lien

Is a charge or claim against a persons property made to enforce the payment of money. When ever someone borrows money, the lender generally requires some form of security. Security also = collateral - something of value that the borrower promises to give the lender if the borrower fails to repay the debt. Lenders security is in the form of real estate, the security interest is called a mortgage lien. Property can thus be used to ensure payment for work performed, material provided, and debts incurred.

Judgement

Is a degree issued by a court. When the degree establishes the amount a debtor owes and provides for money to be awarded, it is called a money judgement. These often result from damages caused to one person by another person through a wrongful act, breach of contract, or nonpayment of debt. **Is a general, involuntary equitable lien on both real and personal property owned by the debtor. No specific parcel of real estate was given as security at the time debt was created. To enforce judgment, the creditor must obtain a writ of execution from the court. A writ of execution directs the sheriff to seize and sell as much of the debtors property as is necessary to pay both the debt and the expenses of the sale.

Encumbrance

Is any charge or claim that attaches to real property and lessens its value or impairs its use. Does not necessarily prevent the transfer or conveyance of the property but because an encumbrance is attached to the property, it transfers along with it. Other encumbrances may be physical in nature and may affect the owners use of the property such as easements and encroachments.

Voluntary Lien

Is created intentionally by the property owners action, such as when someone takes out a mortgage loan.

Tax Rate Calculation

Is determined by dividing the total monies needed for the coming fiscal year by the total assessments of all real estate located within the taxing bodies jurisdiction

Involuntary Lien

Is not a matter of choice, it is created by law and may be ether statutory or equitable

Statutory Lien

Lien created by law

Type of liens

Liens are classified buy how they are created. - Voluntary lien - Involuntary lien - Statutory lien - Equitable lien Memory tip - VISE = Liens

Involuntary lien

May be classified as either statutory or equitable

Example of a specific voluntary lien

Mortgage lien

Mortgage Lien

Most common - is a specific voluntary lien on real estate given to a lender by a borrower as security for a real estate loan. This means that no other liens against the property (aside from real estate taxes) can take priority over the mortgage lien.

Lien for municipal utilities

Municipalities often have the right to impose specific, equitable, involuntary lien on the property of an owner who refuses to pay bills for municipal utility services.

Liens continued

Not limited to security for borrowed money. Liens can be enforced against property by a government agency for payment of property tax owed by owner. Also can be used to force the payment of an assessment or other special charge Represents an interest in ownership, but does not constitute actual ownership of the property. It is an encumbrance. Liens differ from other encumbrance because they are financial or monetary in nature ans attach to the property because of a debt. All liens are encumbrances but not all encumbrances are liens. If liens are not paid in the allotted time, the lienholder may foreclose on the lien, potentially forcing the sale of the property as set out by state law.

Real Estate Taxes and Liens

Ownership of real estate is subject to certain obligations imposed by state and local governments, usually in the form of taxes that become a lien against the property. Creditor or court can also place a claim against property to secure payment for a debt or other obligation. ** Ability to place a lien on property helps provide assurance to governments, lenders, homeowners association and those who provide work or services to improve that property that the property owner will meet financial obligations incurred by virtue of owning the property.

Writ of execution

Permit a law enforcement officer to seize and sell a debtors property

In a court - ordered sale, which of these is paid first?

Real Estate Taxes

Title search

Reveal any recorded liens before closing the real estate transaction

Tax Exemption

Special exemptions to reduce real estate tax bills, for certain property owners and land uses. Use of tax reduction is for agricultural land, sport franchises, attract industries

Corporation franchise tax lien

State governments generally levy a corporation franchise tax on corporation as a condition of allowing them to do business in the state, Such as tax is a general statutory involuntary liens on all real and person property owned by corporation.

Enforcement of tax liens

Tax liens usually are given priority over all other liens against a property. Real estate taxes that have remained delinquent for the statutory period can be collected through a tax sale of property. While the methods and details of the various state tax sale procedures differ substantially the results are the same. A specific amount of delinquent tax and penalty must be collected, the purchaser at a tax sale must pay at least the amount. A certificate of sale is usually given to the highest bidder when the bidder pays the delinquent tax amount in cash. Certificate of sale gives the holder the right to take possession of the property.

Ad Valorem T/F

Taxes are based on the value of the property being taxed and are specific, involuntary statutory liens.

Special Assessment

Taxes levied on specific properties that benefit from public improvements. It creates a lien for the amount of the assessment on the property. Property owners in the improvements area are required to pay for the improvements because their properties benefit directly from them. Example - construction of paved streets, curbs, gutters, sidewalks, storm sewers, or street lighting increases the value of properties that benefit from them. Generally paid in equal annual installments over a period of years.

Assessments

The official purposes by county or township assessors and appraisers A property's assessed value is generally based on the sales price of comparable properties, although practices may vary. Land values may be assessed separately from buildings or other improvements and different valuation methods may be used for different types of property. All for tax purposes.

Priority

The order in which claims against property will be satisfied if the property is sold by the debtor. Rule of priority liens is first record, first in right. Real estate taxes and special assessments generally take priority over all other liens regardless of the order which the liens are recorded. It is important for creditor to have the highest lien priority because it will mean that the creditor will be paid first if it becomes necessary to bring about a forced sale of the debtors property. A creditor in the second or later position may receive little to nothing from the sale.

Statutory rights of redemption

The right of a delinquent taxpayer to recover property AFTER a tax sale. Holder of certificate of sale may not immediately receive the deed to the property. Some states grant a period of redemption after the tax sale. In this case defaulted owner or their creditor, may redeem the property by paying the amount collected at the tax sale plus interest and charges

Equitable right of redemption

The right of a delinquent taxpayer to recover property before a tax sale.

Real Estate Taxes

There are two type of real estate taxes -general real estate taxes and special assessments or improvement taxes. Both are levied against specific parcels of property and automatically become liens on those properties. Owner ship of real estate is subject to certain government powers. One being the right of state and local government to impose (levy) taxes to pay for their functions. Annual tax levied on real estate in most states usually have priority over previously recorded liens and may be enforced by a court ordered sale.

General Lien T/F

They affect all property owned by the debtor. State and federal taxes are imposed involuntarily by statute.

Mechanics Lien Continued

To be entitled to a mechanics lien, the person who did the work must have had a contract with the owner or the owners authorized representative, such as a general contractor. A person claiming a mechanics lien must file a notice of lien in the public record of the county where property is located within a certain time after the work has been completed. A lien waive is required for a contractor to receive a payment from the owners construction loan. If improvements were not ordered by the property owner have commenced, the property owner should execute a document called a notice of non responsibility to be relieved from possible mechanics lien.

Attachment

To prevent a debtor from conveying title to previously unsecured real estate while a court suit is being decided, a creditor may seek a writ of attachment. Which is a court order against the property of another person that directs the sheriff or other officer of court to seize or take control of a property. Arise from an action for payment of an unsecured debt.

All liens are encumbrances

True - but not all encumbrances are liens

Judgment

When real property is sold to pay off a debt the debtor should get a legal document called a satisfaction of judgment.

Satisfaction of judgement (or satisfaction of piece)

When real property is sold to satisfy a debt the debtor should demand legal document. Filing the satisfaction of judgment clears the record of the lien. In those states using a deed of trust, a deed of conveyance must be filed with either the clerk of the court or in some states the recorder of deeds.

Subsequent Liens

are referred to as junior liens

Lis pendens meaning

is a notice of a possible future lien. If it becomes an actual lien the effective date of the lien will be the date and time the lis pendens was filed.

Encumbrances

is any charge or claim that attaches to real property or lessens its value or impairs it uses, but does not prevent the transfer of the property.

Junior lien

one that comes after an earlier lien or liens with higher priority