Real Estate Taxes & Other Liens _ Chapter 11 Prin. of R.E.

Property tax exemptions

1. Homestead: Texas law grants exemption of $15,000 off a home's taxable value for school district taxes - must live there as a principal residence on January 1st of the tax year - submit homestead exemption application - submit copy of driver's license and vehicle registration receipt showing same address as the property 2. Age 65 or older: as of January 1st of the year age 65 is reached; school districts are required to grant a $10,000 age exemption, in addition to the $15,000 homestead exemption - also qualify for: - tax ceiling freeze - portability of tax freeze - installment payments (4 equal) - tax deferral - surviving spouse benefit 3. Disability status: school districts are required to grant $10,000 exemption to persons having a physical or other recognizable disability - cannot quality for both disability and age-65 exemptions

Describe the key components in each of the four phases of the annual tax levy process, as well as the steps for levying special assessments

1. Property valuation: - January 1 - April 30th appraisal district processes applications for tax exemptions, agricultural appraisals, or other tax relief and property renditions; makes value determinations - tax appraisals - for all taxable property w/i its boundaries - for single-residential homestead, notice of appraised value must be delivered by April 1st of each year or as soon as practical; for all other properties, the deadline is May 1 - appraisal district property tax records are available online and reflect current appraised value, sales history, building characteristics, land value, legal description, and taxes on each property - tax appraisal must be 100% of a property's market value; capped at the lesser of the most recent market value or 110% of the value for the preceding tax year, plus improvements on the property - other types of valuations: - agricultural use valuation - open space valuation 2. A protest period: generally begins after the appraisal district has sent appraisal notices; informally reviewed but taxpayer may file a written protest, if not satisfied, by the later of two events - before May 31st, or w/i 30 days after the appraised value was *mailed* by the appraisal district - property owner should receive notice of the date, time, and place for a hearing before an appraisal review board. - property owner is entitled to appeal an order of the ARB to the district court in the county in which the property is located or to submit the dispute to finding arbitration - in certain cities, the property owner may appeal an ARB order to the State Office of Administrative Hearing (SOAH) rather than to the state district court in the county - cities include Austin, Beaumont, Corpus Christi, El Paso, Fort Worth, Houston, Lubbock, Lufkin, McAllen, Midland, San Antonio, Tyler, and Wichita Falls 3. Tax rate adoption: Each property in Texas is subject to taxation by two or more taxing units: a county and a school district, along with others such as city, hospital, community college, water, or other taxing districts - adopts a budget - decides what services they will provide - how much money will be needed - estimate of all expenditures, and amount of income expected from all fees, revenue sharing and other sources - net amount remaining to be raised from real estate taxes - appropriation: the action taken by each taxing body that authorizes the expenditure of funds and provides for the sources of such monies; generally involves the adoption of an ordinance or the passage of a law setting forth the specifics of the proposed taxation. - tax levy (the formal action taken to impose the tax) - tax rate for each individual taxing unit is computed separately. To arrive at a tax rate, the total monies to be raised from real estate taxes for the coming scal year are divided by the total appraisal of all applicable real and personal property located within the jurisdiction of the taxing body. 4. Tax collection: Real estate taxes are paid in arrears—at the end of the period for which they are levied (that is, not in advance). The ad valorem real estate tax becomes a lien on January 1 of the year of the tax. -The delinquency date for annual taxes is February 1 of the year following the tax year; Discounts may be allowed by local option for taxes paid in advance;Most property owners pay their property taxes before the end of the year so they can deduct the payments from their federal income taxes.

attachment

1. The act of taking a person's property into legal custody by writ or other judicial order to hold it avail- able for application to that person's debt to a creditor. 2. A process of converting personal property to real estate.

vendee's lien

A buyer's claim against a seller's property when the seller has not delivered title to the buyer, as in an installment contract or contract for deed.

tax lien

A charge against property created by operation of law. Tax liens and assessments take priority over all other liens.

Uniform Commercial Code

A codification of commer- cial law that attempts to make uniform throughout the United States all laws relating to commercial transactions. Security interests in personal property are created by an instrument known as a security agreement. To give notice of the security interest, a nancing statement must be recorded.

general contractor

A construction specialist who enters into a formal construction contract with a landowner to construct a real estate building or project. The general contractor often contracts with several subcontractors specializing in various aspects of the building process to perform individual jobs.

tax sale

A court-ordered sale of real property to raise money to cover delinquent taxes.

appraisal review board

A group of people who hear appeals concerning assessed valuations for tax purposes and recommend or deny changes in values shown of record

specific lien

A lien affecting or attaching only to a certain, specific parcel of land or piece of property. VOLUNTARY: - special assessment - mortgage - deed of trust - mechanic's contract - bail bond INVOLUNTARY: - ad valorem taxes - mechanic's - affidavit claiming - vendors' liens - vendees' liens

equitable lien

A lien arising out of common law. See statutory lien. one of several equitable remedies which force one party to relinquish a benefit he has received wrongfully (meaning, at another party's expense).

statutory lien

A lien imposed on property by statute (a written law passed by a legislative body) — a tax lien, for example—in contrast to an equitable lien, which arises out of common law.

mortgage (purchase money) lien

A lien or charge on the property of a mortgagor that secures the underlying debt obligations.

wage lien

A lien ordered by the Texas Workforce Commission against all real and personal property of an employer who owes back wages to an employee

voluntary lien

A lien that arises because of actions per- mitted by a person, such as when signing a deed of trust or mortgage.

involuntary lien

A lien that arises by the action of another, such as a judgment lien.

lis pendens

A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or a federal court.

lien

A right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usu- ally by means of a court sale.

mechanic's lien

A statutory lien created in favor of contractors, laborers, materialmen, and others (including architects, engineers, or surveyors) who have performed work or furnished materials in the erection or repair of a building.

special assessment

A tax or levy customarily imposed against only those speci c parcels of real estate that will bene t from a proposed public improvement like a street or paved alley.

subordination agreement

A written agreement between holders of liens on a property that changes the prior- ity of mortgage, judgment, and other liens under certain circumstances.

Surety bond

An agreement by an insurance or bonding company to be responsible for certain possible defaults, debts, or obligations contracted for by an insured party; used to ensure that a particular project will be completed at a certain date or that a contract will be performed as stated.

estate taxes

Federal taxes on a decedent's real and per- sonal property.

TWC WAGE LIENS:

General, Involuntary - "superiority" status and, except for ad valorem tax liens, takes priority over all other liens - attaches to all real and personal property belonging to an employer who owes back wages to an employee, as determined and ordered by the Texas Workforce Commission; - A wage lien should not attach to homestead property because the homestead exemption is a constitutional protection.

FEDERAL JUDGMENT LIENS:

General, Involuntary, Statutory - liens in favor of the federal government or any department or entity of the federal government for such debts as unpaid student loans and deficiencies on government-insured or government-guaranteed loans

IRS TAX LIENS:

General, Involuntary, Statutory - results from a person's failure to pay any portion of federal IRS taxes owed, such as income and withholding taxes. A federal tax lien is a general, statutory, involuntary lien on the taxpayer's equity interest in all real and personal property owned by the delinquent taxpayer. A federal tax lien is effective for 10 years unless renewed by re ling.

JUDGMENTS:

General, Involuntary, Statutory -a decree issued by a court; The county clerk certifies the abstract of judgment and records it in the real property records creating a lien; A judgment becomes a general, involuntary, statutory lien on both real and personal property owned by the debtor, including real and personal property acquired after the judgment is recorded

ESTATE & INHERITANCE TAX LIENS:

General, Statutory, Involuntary -liens that encumber a deceased person's real and personal property. These are normally paid or cleared in probate court proceedings.

federal judgement lien

Lien obtained by the United States or an agency, department, commission, board, or other U.S. entity that affects all real and personal property of the judgment debtor.

MECHANICS' LIENS:

Mechanic's Lien Contract: Specific, Voluntary, statutory Affidavit Claiming a Mechanic's Lien: Specific, Involuntary -gives security to persons or companies that perform labor or furnish material to improve real property. It is based on the enhancement of value theory

Special Assessments & Utility District Tax

SPECIAL ASSESSMENTS: are taxes levied on real estate that require property owners to pay for improvements that bene t the real estate they own. These taxes often are levied to pay for such improvements as streets, alleys, street lighting, curbs, and similar items and are enforced in the same manner as general real estate taxes. Special assessments are always specific and statutory; however, they can be either voluntary or involuntary liens Although real property taxes on a personal residence are deductible items for income tax purposes, special assessment taxes are not. The annual interest charged in connection with special real estate assessments is deductible, however. UTILITY DISTRICT TAX: to provide water, sewer, drainage, and/or flood control protection facilities or services for properties located outside the boundaries of a town or city (water control districts, underground water conservation districts, municipal utility districts (MUDs), and drainage district)

VENDORS' LIENS:

Specific, Equitable, Involuntary - lien for the amount of unpaid balance due the seller.

Vendee's Lien

Specific, Equitable, Involuntary - a buyer's claim against a seller's property in the event that the seller failed to deliver title; a specific, equitable, involuntary lien for any money paid plus the value of any improvements made to the property by the buyer.

ad valorem tax

Specific, Involuntary A tax levied according to value; generally used to refer to real estate tax. levied for the general support or operation of the government agency authorized to impose the levy levied by: cities, towns, villages, counties, publicv school districts or boards, junior & community colleges, drainage districts, hospital districts, water districts, and sanitary districts, as well as municipal authorities operating recreational preserves and parks

MORTGAGE (deed of trust or purchase money) LIENS:

Specific, Voluntary - lien on real estate given to a lender by a borrower as security for a mortgage loan.

SURETY BAIL BOND LIENS:

Specific, Voluntary A real estate owner charged with a crime requiring a trial may choose to put up real estate instead of cash as surety for bail; A surety bail bond lien cannot be levied against a homestead property.

inheritance taxes

State-imposed taxes on a decedent's real and personal property.

vendor's lien

The equitable lien of the grantor upon the land conveyed, in the amount of the unpaid purchase price.

judgment

The formal decision of a court on the respec- tive rights and claims of the parties to an action or suit. After a judgment has been entered and recorded with the county clerk, it usually becomes a general lien on the prop- erty of the defendant.

priority

The order in which unpaid debts or obligations will be satis ed if the property goes through a court sale.

assessment roll

The public record of the assessed values of all lands and buildings within a speci c area.

general lien

The right of a creditor to have all of a debt- or's property—both real and personal—sold to satisfy a debt. - federal liens - judgements - estate & inheritance taxes - debts of a deceased person - IRS taxes - Wage Lien

statutory right of redemption

The right of a defaulted property owner to recover the property after its sale by pay- ing the appropriate fees and charges; available in Texas for tax foreclosures and homeowners' associations assessment liens; not available for a deed of trust foreclosure.

equitable right of redemption

The right to redeem a property before a foreclosure sale by paying the full debt plus interest and accrued charges.

financing statement

To give notice of the security interest

Distinguish between different general liens, voluntary and involuntary liens, statutory and equitable liens and give examples of each.

VISE: - Voluntary: created by the lienee's action, i.e. taking out a mortgage loan - Involuntary: created by law - either statutory or equitable - Statutory: federal tax liens, ad valorem ta liens, judgment liens, mechanics' & materialmen's liens; real state tax lien - Equitable: vendor or vendee's lien GENERAL LIENS: Involuntary liens, usually affect all of a debtor's property both real and personal, and include judgments, estate and inheritance taxes, income tax, debts of a deceased person, IRS taxes, and federal judgement liens, TWC Wage Lien. SPECIFIC LIENS: voluntary and involuntary, usually are secured by a particular parcel if real estate and affect only that property. Include Voluntary: special assessment lien; mortgage lien; deed of trust lien; mechanic's lien, bail bond lien Involuntary: ad valorem tax lien, affidavit claiming a mechanic's lien; vendor's lien; vendee's lien

UNIFORM COMMERCIAL CODE LIENS:

a body of law that attempts to codify and make uniform throughout the country all laws relating to commercial transactions. The main relevance of the UCC to real property is in the area of personal property and fixtures;If the financing statement has been recorded properly, on the borrower's default the creditor could repossess the personal property and remove it from the property.

security agreement

an instrument used to create a security interest in personal property A document that provides a lender a security interest in a specified asset or property that is pledged as collateral. In the event that the borrower defaults, the pledged collateral can be seized and sold. A security agreement mitigates the default risk the lender faces.

surety bail bond lien

as security for bail. A pledge of real estate instead of cash

Effects of Liens on Title

fee simple estate can be reduced in value by a lien, but owner can still sell. Liens will 'run with the land', so the purchaser risks losing the property if the debt is not taken care of

Identify the process through which real estate taxes become delinquent and/or become a lien, the enforcement options, and the equitable and statutory rights of redemption

if the taxes are not paid or if an installment agreement is not entered into or the agreement is defaulted, the tax collector's last resort is to take a delinquent taxpayer to court to foreclose on the tax lien. After a court has rendered judgment for the tax, penal- ties, and interest and ordered the property to be sold, a tax sale is held pursuant to a published notice. -equitable right of redemption: the delinquent taxpayer can redeem the property at any time prior to the tax sale by paying the delinquent taxes plus interest and charges (court costs or attorney fees) -statutory right of redemption: Texas law provides for a period of redemption after the tax sale during which the defaulted owner may redeem the property by paying the amount paid at the tax sale, plus interest and other charges;The cost of the statutory right of redemption is an additional 25% of the purchase price if redeemed during the rst year and 50% if redeemed during the second year as long as the property is redeemed from a third-party purchaser