Law & Practice 4
The current value of a property is $255,000, and it is assessed at 35% of its current market value. What is the amount of the real estate tax due on the property if the tax rate is $3.50 per $100 of assessed value?
a. 2039.99 b. 2499 c. 1115.63 d. 3123.75 Correct answer: d. 3123.75 Explanation: 255,000 x .35 = 89,250.00, 89,250 x .035 = 3,123.75
Which of the following is a lien on real estate?
a. Encroachment b. Easement c. Mortgage d. License Correct Answer: C. Mortgage. Explanation: A mortgage loan is a loan secured by real property through the use of a mortgage note or promissory note which evidences the existence of the loan and the encumbrance of that real estate. A mortgage is a lien, an encroachment and an easement may be encumbrances.
An encumbrance that affects the title, usually related to money, is known as:
a. a lien b. an easement in gross c. an easement by necessity d. an easement by prescription Correct Answer: A. A lien. Explanation: A lien is a charge against a property -- a financial encumbrance. The other easements listed here do not deal with finances, but are considered usage encumbrances and affect the way in which the land may be USED. Alternatively, they may be divided into those that affect title (ex: lien, legal or equitable charge) or those that affect the use or physical condition of the encumbered property (ex: restrictions, easements, encroachments).
Property taxes are also referred to as
a. ad valorem b. lis pendens c. lien pendens d. ad valium Correct Answer: A. Ad valorem Explanation: Ad valorem means according to value. The higher the value the higher the amount of tax.
A lien that covers all real and personal property of the debtor within the county where recorded is a:
a. mechanic's lien b. judgment lien c. writ of execution d. lis pendens Correct Answer: B. Judgment lien. Explanation: A judgment lien (a general lien) is a lien that covers all real and personal property of the debtor.
You have listed a house for $197,800. If the house sells for the listed price, the seller will make a profit of 15%. What price did the seller pay for the house?
a. 167900 b. 172000 c. 168130 D. 176500 Correct Answer: B. 172000 Explanation: The selling price is 115% of what the seller paid for it. To find out what the seller paid for it divide $197,800 by 115% = $172,000 Let's use the IRV method we discuss in the classes. Since the property sold for the listing price, the income generated (the top number in the circle) was $197,800, since this represented 15% over the original purchase price of the property, the Rate (bottom left side of the circle) is 115%. This is because the Rate and Income Generated are always the same value, only one is expressed in dollars and the other as a percentage. Since the $197800 represents the original price + 15%, then that number as a percentage would be 115% of the original price. Divide the rate into the income generated and it will give you the unknown part of the circle Value (bottom right) or $172,000. Remembering these formulas can be tricky, so in the classes we teach the IRV method.
What is the difference between a specific and a general lien?
a. A general lien is less binding than a specific lien b. A general lien affects all of an individual's property, a specific lien does not c. General and specific liens are the same as a judgment lien d. A specific lien affects all of an individual's property, a general lien does not Correct Answer: B. A general lien affects all of an individual's property, a specific lien does not. Explanation: Specific liens are judgments against a specific individual or property, a general lien affects all properties owned, real and personal.
Bob Burnside has defaulted in payment of several debts, and a court has ordered his property sold to satisfy them. A report reveals several outstanding liens against the property. Which has first priority?
a. The outstanding mortgage dated and recorded one year ago b. Current real estate taxes c. A mechanic's lien for work that was started two months before the date the mortgage was recorded d. A court judgment rendered and recorded last month Correct Answer: B. Current real estate taxes Explanation: Real estate taxes always have first priority.
A lien placed against a specific property by workers or suppliers who have not been paid for labor or materials used in construction or improvements to the property is known as:
a. a statutory lien b. a voluntary lien c. an equitable lien d. a mechanic's lien Correct Answer: D. A mechanic's lien. Explanation: A mechanic's lien, as the name states, is placed by mechanics, other workers, or suppliers of materials. A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. In the realm of real property, it is called by various names, including, generically, a construction lien. It is also called a materialman's lien or supplier's lien when referring to those supplying materials, a laborer's lien when referring to those supplying labor.
The tax on a given piece of real property is always determined by multiplying the mill levy by the:
a. selling price b. assessed valuation of the property c. mortgage loan value d. book value Correct Answer: B. Assessed valuation of the property. Explanation: The assessed value of property is the County Assessor's determination of a percentage of the true and fair market value of the property.
If the Title Company discovers a delinquent sewer assessment, the party that would normally be required to pay for the portion that is in arrears is:
a. the buyer b. the seller c. both the buyer and seller d. to be settled by mutual agreement Correct Answer: B. The seller. Explanation: Generally, it is the seller's responsibility to discharge all encumbrances against the property and deliver clear title to the purchaser, but either party could pay the assessment. If the owner of the property refuses to pay, the county could force the sale of the property to satisfy specific involuntary liens.
Mechanic's liens have a priority date of:
a. the day the judgment was issued b. the day the work first began c. the day the work was completed d. the day the judgment was recorded Correct Answer: B. The day the work first began Explanation: Mechanic's liens have priority as of the date material was delivered or work began, rather than the date recorded. Mechanic's Lien: The right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that real property for the value of the services and/or materials if not paid. With certain exceptions, the Colorado Mechanic's Lien Act requires that a mechanic's lien be recorded within four months of the date that the contractor, subcontractor or supplier performed its last work or last supplied material or equipment. The priority date is as of the date material was delivered or work began, rather than the date recorded. Recording a mechanic's lien assists in securing the real property upon which improvements were made as collateral. The lien claimant has six months from the date that last work was performed or material supplied to file a lawsuit to foreclose its lien and to record notice of its lawsuit (this notice is called a "lis pendens") with the Clerk and Recorder of the County where the real property is located.
Which of the following is recorded notice of a pending lawsuit?
a. Ad valorem b. Nolo contendre c. Lis pendens d. Prima facie Correct Answer: C. Lis pendens. Explanation: A lis pendens is a written notice filed in the public records for the purpose of preventing any sale of the property which otherwise thwart the purpose of a pending lawsuit. A lis pendens and a writ of attachment have the same effect: the difference is an attachment is a court ordered holding of the property, while a Lis Pendens is only a recorded notice of pending litigation. In current practice, a lis pendens is a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens against a piece of property alerts a potential purchaser or lender that the property's title is in question, which makes the property less attractive to a buyer or lender.
Jeff's land has an easement to cross Bill's property. Jeff subdivides his property and sells to Charlie. Which statement is true?
a. Land benefitting from an easement cannot be subdivided b. Both Jeff's and Charlie's land have easement rights c. Jeff's land retains the easement, but Charlie's does not d. The easement no longer exists Correct Answer: B. Both jeff's and charlie's land have easement rights. Explanation: Subdividing does not change the easement rights, they are for the land not the individuals. An easement is a certain right to use the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B." Easements are helpful for providing pathways across two or more pieces of property or allowing an individual to fish in a privately owned pond. An easement is considered a property right in itself by common law and is still treated as a type of property in most jurisdictions.
Which of the following is a voluntary lien?
a. Mortgage b. Estate tax c. Special assessment d. Ad valorem tax Correct Answer: A. Mortgage. Explanation: A mortgage is voluntary: taxes are assessed whether or not we want them.
All of the following are examples of a specific lien, EXCEPT:
a. Mortgage b. Mechanic's lien c. Judgment d. Property taxes Correct Answer: C. Judgment. Explanation: All of the rest apply to a specific property, while a judgment is against an individual and all of their property.
Mr. and Mrs. Davis, tenants, decide to have their apartment redecorated on June 15. Contractor Jones says he will do the job for $4,000 and informs Smith (the property owner), by registered letter, the job will be completed by June 13. Upon completion, Davis tells Jones to see Smith for payment:
a. Smith is not liable since he did not contract with Jones b. Smith may be liable since he had notice and did nothing c. Smith is not liable since his wife signed for the registered letter d. Mr. and Mrs. Davis only are liable Correct Answer: B. Smith may be liable since he had notice and did noting. Explanation: Smith must pay the contractor. He had express notice (the registered letter) that the work was being performed. His failure to respond indicated approval. He may, however, take legal action against Davis. Smith should have provided notification of his non-responsibility as soon as he was notified.
Johnson helped dig a sewage ditch for property owner Smith on February 21 and 22. On March 9, a mortgage was recorded against the property. On March 11, still unpaid, Johnson filed a mechanic's lien of record. Which of the following is true?
a. The bank's mortgage lien was recorded first and has priority over the mechanic's lien b. The mechanic's second lien status precludes a foreclosure action by Johnson c. The mechanic's lien has priority over the mortgage lien d. Mortgage liens always have priority over all other types of liens except for property tax liens Correct Answer: C. The mechanic's lien has priority over the mortgage lien. Explanation: How the priority date of Mechanic's liens are determined is different than any other lien. The date labor ensued or when supplies were delivered and not the date the lien was recorded is the priority date of a Mechanics lien. In this question - the labor was provided before the mortgage lien was filed of record - therefore the Mechanics lien would take precedence. . Mechanic's Lien: The right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that specific property for the value of the services and/or materials if not paid. With certain exceptions, the Colorado Mechanic's Lien Act requires that a mechanic's lien be recorded within four months of the date that the contractor, subcontractor or supplier performed its last work or last supplied material or equipment. The priority date is as of the date material was delivered or work began, rather than the date recorded. Recording a mechanic's lien assists in securing the real property upon which improvements were made as collateral. The lien claimant has six months from the date that last work was performed or material supplied to file a lawsuit to foreclose its lien and to record notice of its lawsuit (this notice is called a "lis pendens") with the Clerk and Recorder of the County where the real property is located. Mechanics' Liens are classified as an Involuntary lien because the owner has no choice. They are also classified as an Equitable lien because the lien holder does not have possession of the property the lien is against. BTW - this is why at closings, good Buyer's agents always insist on seeing paid receipts for work the Sellers perform on the property. Nothing will ruin a new homeowner's day than to find out the Seller never paid for that new roof and under the rules of a Mechanics Lien, the roofer has slapped a lien on the property. Ultimately, the new homeowner is not responsible for the roof obligation, but they are now going to have to go to court to clear the lien.
A lien's priority is determined by:
a. The size of the lien determines priority b. A mechanic's lien always has first priority c. The date of the lien determines priority d. The date the lien is recorded determines priority except mechanic's liens Correct Answer: D. The date the lien is recorded determines priority except mechanic's lien. Explanation: The date that the lien is recorded determines its priority, except for a mechanic's lien. The priority for a mechanic's lien is determined by the date the work commenced or the materials delivered.
The type of lien that is secured by specific property and only affects that property is known as:
a. a statutory lien b. a voluntary lien c. an equitable lien d. a specific lien Correct Answer: D. A specific lien. Explanation: A specific lien involves specific property- as opposed to voluntary liens, created by choice, equitable liens, created by agreement, or statutory liens, created by law.
Unauthorized use of land may mature into an easement by prescription:
a. after 8 years b. after 18 years c. after 19 years Correct Answer: B. After 18 years. Explanation: In Colorado an easement by prescription can be exercised in 18 years. Easement by prescription can vary by state from a period of 7 years up to 21 years. The similarities between adverse possession and prescriptive easements far outweigh the differences. Both result from the operation of the statute of limitations for trespass. In addition, both require that the following elements are satisfied: open and notorious, adverse, continuous and uninterrupted, for the statutory period. The differences lie primarily in determining what is accomplished by satisfying those elements. With adverse possession, the goal is to acquire title to real property. For that reason, in addition to the elements above, an additional element is actual and exclusive possession of the property. If x has actual and exclusive possession which is open and notorious, adverse, continuous and uninterrupted for the statutory period, and the owner of the property does not take action to eject x within that time, then title to the property will vest in x. Acquiring an easement by prescription, however, is not directed towards the goal of acquiring title to property. Rather, it's directed towards acquiring an easement, even though the formalities usually required to create an easement (for example a writing signed by the grantor) are not present. So, if x uses (rather than possesses) the land of y, and the use is open and notorious, adverse, continuous and uninterrupted, for the statutory period, the x has acquired an easement and can continue to use that land in the same manner as his previous use.
A charge levied by a local government to finance improvements such as repairing sidewalks in a neighborhood is:
a. an ad valorem tax b. a zoning charge c. an equalizer d. an assessment Correct Answer: D. An assessment. Explanation: Because it's for a particular property or properties' benefit only, it's called a special assessment. Special assessment is the term used in the United States to designate a unique charge that government units can assess against real estate parcels for certain public projects. This charge is levied in a specific geographic area
When a lien against a parcel of real estate may result from a lawsuit currently before the courts, one examining the public records would look for:
a. constructive notice b. a lis pendens notice c. the chain of title d. a suit to quiet title Correct Answer: B. A lis pendens notice Explanation: Lis pendens means "suit pending".
A court orders real property sold, to satisfy an unpaid lien, is an action known as a(n):
a. easement b. encumbrance c. attachment d. writ of execution Correct Answer: D. Writ of execution Explanation: A writ of execution is a court ordered sale. This can be used in foreclosures by courts to order the sale of a property. A writ of execution (also known as an execution) is a court order granted to put in force a judgment of possession obtained by a plaintiff from a court. When issuing a writ of execution, a court typically will order a sheriff or other similar official to take possession of property owned by a judgment debtor.
A utility company has an easement to service its equipment. This is an example of:
a. easement in gross b. encroachment c. police power d. easement by prescription Correct Answer: A. Easement in gross. Explanation: A utility company has an easement in gross to service its equipment. A government authority or private service provider may acquire a gross easement over private land by virtue of the public service it performs. For example, a local authority may have the responsibility of installing and maintaining the sewerage system in an urban area. Merely by the fact that it has that responsibility, usually enshrined in some statute or local laws, gives the authority the right, by virtue of a gross easement, to enter private property to carry out installation and maintenance. The location of the easement will not usually be described precisely, but its general position will be defined by the service route (i.e. the sewer pipes in this example). Power and water lines may also have gross easements linked to them, but drainage and stormwater systems are commonly precisely defined in location and recorded in the title documents for private land.
A mechanic's lien is properly classified as a(n):
a. equitable lien b. involuntary lien c. specific lien d. all of the above Correct Answer: D. All of the above Explanation: Mechanics liens are levied against a specific parcel of land, not all the owners assets. It is involuntary because the owner has no choice. It is equitable because the lien holder does not have possession of the property the lien is against. Mechanic's Lien: The right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that specific property for the value of the services and/or materials if not paid. With certain exceptions, the Colorado Mechanic's Lien Act requires that a mechanic's lien be recorded within four months of the date that the contractor, subcontractor or supplier performed its last work or last supplied material or equipment. The priority date is as of the date material was delivered or work began, rather than the date recorded. Recording a mechanic's lien assists in securing the real property upon which improvements were made as collateral. The lien claimant has six months from the date that last work was performed or material supplied to file a lawsuit to foreclose its lien and to record notice of its lawsuit (this notice is called a "lis pendens") with the Clerk and Recorder of the County where the real property is located. Mechanics' Liens are classified as an Involuntary lien because the owner has no choice. They are also classified as an Equitable lien because the lien holder does not have possession of the property the lien is against.
A lien is a monetary claim that if unpaid awards the lien holder the right of:
a. foreclosure b. eviction c. ownership d. possession Correct Answer: A. Foreclosure. Explanation: A lien on a property gives the lienee (the lender) a right of foreclosure if the lien is not paid. Foreclosure is a specific legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan. Eviction is the removal of a tenant from rental property by the landlord or from premises that were foreclosed and then sold to the highest bidder.
Real estate property taxes are
a. general - involuntary liens b. general - voluntary liens c. specific - voluntary liens d. specific - involuntary liens Correct Answer: D. Specific-involuntary liens. Explanation: If the property tax is unpaid, the tax can be satisfied only from the sale of the specific property upon which the tax is levied. The only voluntary liens are mortgages and deed of trust.
A lien placed on the property without the consent of the owner is known as a(n):
a. involuntary lien b. deed of trust lien c. voluntary lien d. mortgage lien Correct Answer: A. Involuntary lien. Explanation: An involuntary lien is created by law without any action on the owner's part. A voluntary lien, just the opposite, is created by the owner -- this includes a mortgage lien or deed of trust lien. involuntary lien—a lien arising without the lienor's consent. voluntary lien—a lien created with the lienor's consent. An involuntary lien is a claim made against property to which the property owner did not consent or agree. Due to some action or inaction by the property owner, a third party places a lien on the property to secure money owed to the third party by the property owner. Common types of involuntary liens include local, state, and federal government tax liens, and contractor's or mechanic's liens for improvements made on the real estate. In each of these types of involuntary liens, the property owner did not consent to having the lien placed on the property; however, the third party was able to place a lien on the property due to the property owner's failure to pay tax bills, or pay for services or materials provided by a builder or contractor. An involuntary lien is the opposite of a voluntary lien, such as a mortgage lien; in the case of a voluntary lien, the property owner takes some affirmative action to have a lien placed on the property.
Possession under a claim of adverse possession must be:
a. open, notorious, and hostile b. open, hostile, and continuous c. notorious, hostile, and continuous d. open, hostile, notorious, and continuous Correct Answer: D. Open, hostile, notorious, and continuous Explanation: The requirements of title by adverse possession are open, notorious use for the statutory period, hostile to the will of the owner. The adverse possession can be seven years if the adverse possessor pays the taxes during this period and is in possession of the property. The adverse party is called the disseisor, meaning one who dispossesses the true owner of the property. The disseisor must openly occupy the property exclusively, keeping out others, and use it as if it were his own. Generally, the openly hostile possession must be continual (although not necessarily continuous or constant) without challenge or permission from the lawful owner, for a fixed statutory period to acquire title.
Before the government can exercise the right of eminent domain, the use must be:
a. public, and the property owner given just compensation b. practical, and the property owner given just compensation c. for some use of the government d. for the order, safety, health, morals, and general welfare of the government and governmental employees Correct Answer: A. Public, and the property owner given just compensation. Explanation: The government may condemn private property for public use if the owner is given just compensation.
If a debtor owns three pieces of real estate located in the same county, and a judgment is entered against him, it will be a lien against:
a. the property first acquired b. the property last acquired c. all three properties d. homestead property only Correct Answer: C. All three properties. Explanation: A judgment lien is general, involuntary lien, affecting all properties owned by a debtor in the county where the judgment was recorded, as well as any he acquires subsequent to the judgment
