Level 5: Easements and Liens

How are Liens Terminated

(1) General Liens can be transferred (2) Paying the Lien at

General Liens Include.........

(1) Judgment liens (lis pendens) (2) Estate and inheritance tax liens (3) Decreased persons' debt (4) IRS tax lens

Specific Liens Include.........

(1) Mortgage lien (2) Mechanic's lien (3) Vendor's lien (4) Vendee's lien (5) Bail bond lien (6) Municipal utility lien

Mortgage Lien

A mortgage is a type of voluntary lien. Typically when a person buys a home, the home itself becomes collateral for the loan. The lender obtains a mortgage lien with the homebuyer's consent. Mortgage liens are specific liens because they only apply to the property that is secured by the debt. A mortgage lien guarantees possession of the property to the lender if the borrower does not make the required payments. The mortgage allows the lender to force the sale of a property to recoup any losses

Execution Liens

A writ of execution can be issued by a court to force payment of monies owed from a judgment when a debtor does not pay. It gives court officers the right to confiscate and sell the debtor's property to satisfy the debt. The writ of execution is itself an involuntary lien, called an execution lien. It attaches to the property until it is sold.

Junior Liens

Also known as inferior lien, is a lien that has another (senior) lien superseding it in priority.

Senior Liens

Also known as superior lien, is a lien that comes first in the priority of liens. If there's an ad valorem or special assessment tax lien involved, it will be the senior lien.

Ad Valorem Taxes

Are also known as property taxes. They're levied on every property based on the assessed value of that property. Ad valorem tax rates are set by local gov'ts and vary from municipality to municipality.

Judgment Liens

Are decrees given by courts at the conclusion of lawsuits. They may specify that one party to the lawsuit owes money to the other party. The winning party can claim a lien against the loser's real and personal property. That means judgment liens are general, involuntary liens.

Bail Bond Liens

Bail bonds can be put up in the form of real estate in lieu of cash when a property owner is accused of a crime. This bill creates a bail bond lien: a specific, involuntary lien enforceable by a court officer or the sheriff if the accused property owner does not appear in court.

Consequences of Tax Liens

If a property owner fails to pay their ad valorem (property) taxes, the taking authority is likely to take action: (1) First, the taxing authority will send delinquency notices. (2) If the taxes still go unpaid, they will put a tax lien on the property (3) The last resort is to foreclose on the property.

Municipal Utility Liens

If a property owner refuses to pay bills for municipal utilities, the municipality can obtain a municipal utility lien on the property. It is a specific, involuntary lien.

Paying The Lien at Closing

If the proceeds from the sale will cover the debt, those funds will be withheld at settlement to pay the lender. A record of satisfaction of the lien will be filed in the public records. If the debt is larger than the proceeds of the sale, the seller has the option of settling the remaining debt by paying the balance at closing.

General Liens can be Transferred

In the case of a general lien, which doesn't need to stay with that specific property, the seller may convince the lender to release the lien from the property and transfer it to some other acceptable property or collateral that the seller owns.

Lien

Is a claim made by a creditor against real or personal property pledged by a debtor as collateral. Because liens are creditors claims that impact the title, they are considered encumbrances.

Subordination Agreements

Is a contract that gives a mortgage recorded at a later date priority over previously recorded mortgages. It's separate from the sales contract, and it used when the lien holder is unwilling to accept a lower portion in the priority of liens.

Lis Pendens

Is a document recording at the courthouse giving notice that a lawsuit is pending on a particular piece of property. This informs the public, including any interested parties, of the potential claim on the property.

Mortgage

Is a legal agreement between a creditor and a borrower in which the creditor lends money with interest to the borrower for the purchase of property with the condition that the creditor takes ownership of the title if the borrower defaults in repayment of the loan. With a mortgage, a debtor voluntarily offers the property as security for the loan.

General Liens

Is a lien for which the real estate AND personal property may be sold to satisfy debt.

Specific Lien

Is a lien that applies to a certain property only. Personal property is not affected.

Voluntary Liens

Is a lien that is created on purpose and with the agreement of the owner of the property in question. That means the property owner chose to initiate a lien that would not otherwise exist.

Vendor's Lien

Is a specific, involuntary lien that is used when a buyer doesn't want pay the full purchase price of the property, essentially borrowing money from the seller. Until the buyer pays the seller all the money they owe them, the seller has a vendor's lien on the property. The seller is lending the buyer money to buy the property, and the property itself is being used as collateral.

Mechanic's Lien

Is a type of involuntary, specific lien that a contractor, subcontractor, or supplier can put on a property if the property owner fails to pay for materials or work done on the property. Mechanic's lien protect suppliers, contractors, architects, engineers, surveyors, and other parties whose labor or materials have improved the value of real property. Mechanic's liens are a crucial means for people to ensure payment for the work they perform.

Lien Priority

Is the order in which liens against a property will be settled. In other words, if a property owner defaults on a loan and their property is foreclosed on, the lien priority determine who gets paid first.

Vendee's Liens

Is used when a buyer fulfills their end oof a contract and the seller fails to hand over the property. It's often used in conjunction with a contract for deed, where the buyer makes payments to the seller in lieu of ( or in addition to) taking out a loan. A contract for deed states that the seller will give a deed to the buyer someday, usually when the last payment is made. A vendee's lien is applied if the seller fails to deliver the deed as promised in the contract.

How are Liens Prioritized

Liens are commonly prioritized in the same order in which they were recorded. First in First out. However, there is one major exception to the "first in first out" rule. Some taxing entities take priority over any other kinds of liens in the public records. Ad valorem taxes and special assessments will always be paid first. That;'s know as being in the first position.

Special Assessments

Or improvement taxes, are taxes levied on a particular neighborhood or are for a specific improvement, like new sidewalks, for example. The cost of the improvement will be shared by homeowners in the area.

Attachment Liens

Plaintiffs in a lawsuit may seek a writ of attachment, in which the court seizes property until it reaches a judgment. Creditors must post a surety bond or a deposit large enough to cover any potential losses the defendant might suffer in order to obtain a writ of attachment. This protects debtors if the court decides in their favor. An attachment lien is a general involuntary lien and may attach to all of the owner's property except their homestead property.

Ad Valorem Tax Liens V. IRS Tax Liens

Recall that ad valorem taxes, which are based on a percentage of the property value, are levied by local tax authorities as property taxes. Since these are based on the property alone, a tax lien for as valorem taxes (property taxes) is a specific lien. However, an IRS tax lien is based on unpaid income taxes for the individual, not just a specific property. Therefore, an IRS tax lien is a general lien. It affects any property an individual owns, including both real and personal property.

General and Specific Tax Liens

Some taxes, like inheritance tax and income tax, create general liens. Others, like property tax, create specific liens.

Estate and Inheritance Taxes

The asset that a person leaves behind when they die are called an estate. Estate and inheritance are subject to an estate tax . After deducting qualifying expenses, like the cost of the funeral, the remains tax bill creates an involuntary, general lien on the estate.

Involuntary Liens

The opposite of a voluntary lien is an involuntary lien, which is obtained through an action of law without the owner's consent. The property owner does not take any action to initiate the lien. Real estate tax liens and judgement liens are examples of involuntary liens.

Specific Tax Liens

These tax liens are specific to the property and attach to one property in particular, not all of a taxpayer's personal and real property. These liens are specific to the property because the taxes are specific to the property. In order to raise revenue for the local community and gov't agencies, state and municipal gov'ts impose taxes on real estate. Gov'ts typically levy two types of taxes on real estate: (1) Special Assessments (2) Ad Valorem Taxes

Tax Liens

They are considered statutory liens because they are brought boy a gov't entity. A tax lien is a lien that is imposed against a property if the property owner becomes delinquent in the payment of taxes.

Vendor's Lien Used with Warranty Deeds

Vendor's liens are often used in conjunction with warranty deeds. Unlike a mortgage lender, a seller with a vendor's lien can't foreclose on the property. Vendor's liens are enforced by filing suit to have the property sold. Vendor's liens are a type of statutory lien. Much like mechanic's liens, vendor's liens occur when a property owner does not pay their financial obligation in full. The difference is that a vendor's lien concerns the selling of the property.

Federal Tax Liens

When a person does not pay Internal Revenue Service (IRS) taxes, such as the federal income tax, the ORS may obtain a federal tax lien. This is a general, involuntary lien that is held against all of the defaulting taxpayer's property.