Liens as Encumbrances Quiz
66 Questions
2 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary function of a lien?

  • To establish a claim against property as collateral for a debt (correct)
  • To erase any existing debt
  • To transfer ownership of property to the borrower
  • To enhance the value of the property

Which statement accurately describes how liens affect property sales?

  • A property with a lien cannot be sold unless the lien is paid off by closing (correct)
  • Buyers are always willing to purchase properties with liens
  • Liens do not impact the ability to sell a property
  • Liens enhance the saleability of a property

What distinguishes a voluntary lien from an involuntary lien?

  • Involuntary liens are always preferred by creditors
  • There are no legal implications for voluntary liens
  • Voluntary liens are created with the consent of the property owner (correct)
  • Voluntary liens are initiated without any agreement

Which type of lien is a mortgage classified as?

<p>Voluntary lien (A)</p> Signup and view all the answers

What is a key example of an involuntary lien?

<p>Real estate tax lien (C)</p> Signup and view all the answers

What is the difference between a general lien and a specific lien?

<p>Specific liens apply to certain property, while general liens cover both real estate and personal property (B)</p> Signup and view all the answers

What happens to a property with a lien if the borrower defaults?

<p>The lender can liquidate the property to recover the debt (A)</p> Signup and view all the answers

Which of the following statements is true regarding liens in real estate?

<p>Only voluntary liens can lead to foreclosure (A)</p> Signup and view all the answers

What happens if a taxpayer does not respond within 10 days of receiving a Notice and Demand for Payment from the IRS?

<p>The IRS may create a lien for the amount of the debt. (C)</p> Signup and view all the answers

What is a mortgage lien primarily secured by?

<p>The home itself that is purchased. (B)</p> Signup and view all the answers

Who is the mortgagor in a mortgage agreement?

<p>The borrower who takes out a loan. (C)</p> Signup and view all the answers

What is the purpose of a mechanic's lien?

<p>To secure payment for labor or materials provided. (B)</p> Signup and view all the answers

Which statement is true about mechanic's liens?

<p>They are based on the enhancement of value theory. (B)</p> Signup and view all the answers

In Pennsylvania, who is NOT eligible to file a mechanic's lien?

<p>Third-tier subcontractors. (B)</p> Signup and view all the answers

What is the main difference between a vendor's lien and a mortgage?

<p>A vendor's lien cannot be foreclosed on by the seller. (A)</p> Signup and view all the answers

What must a person file within a month of the lien being recorded?

<p>A notice of filing to the property owner. (C)</p> Signup and view all the answers

How long does a person have to enforce a mechanic's lien after filing?

<p>Two years. (C)</p> Signup and view all the answers

In the context of tax, what can homeowners and investors do to reduce federal income tax?

<p>Utilize tax shelters. (A)</p> Signup and view all the answers

What is required for a valid mechanic's lien under Pennsylvania law?

<p>Direct communication with the property owner. (D)</p> Signup and view all the answers

What is typically the first step taken by the IRS upon assessing a taxpayer’s liability?

<p>Issuing a Notice and Demand for Payment. (A)</p> Signup and view all the answers

What form of tax lien ranks in priority below a mortgage lien?

<p>Federal tax liens. (C)</p> Signup and view all the answers

What are the two key terms defined in a mortgage agreement?

<p>Mortgagor and Mortgagee. (B)</p> Signup and view all the answers

Which of the following improvements can be funded by special assessments?

<p>Curb improvements (B)</p> Signup and view all the answers

How are costs for a new sidewalk typically divided among property owners?

<p>Based on the length of sidewalk built on each property (B)</p> Signup and view all the answers

What kind of lien allows a commercial broker to recoup a commission if the client does not pay?

<p>Commercial broker lien (C)</p> Signup and view all the answers

What determines the order of payment when a property is sold at a foreclosure auction?

<p>The priority of liens (A)</p> Signup and view all the answers

What is a vendee's lien intended to ensure for the buyer?

<p>The repayment of what the buyer has paid. (A)</p> Signup and view all the answers

What is the importance of lien priority?

<p>It decides the payment order to lien-holders if foreclosure occurs. (B)</p> Signup and view all the answers

Which type of lien is considered 'first place' when payments are made?

<p>Ad valorem taxes and special assessments (B)</p> Signup and view all the answers

Under what condition is a vendee's lien unnecessary?

<p>The seller carries the full amount of the loan. (B)</p> Signup and view all the answers

What is the nature of a bail bond lien?

<p>An involuntary lien that is enforced by the sheriff. (B)</p> Signup and view all the answers

What characterizes a junior lien?

<p>It is recorded after a senior lien and is therefore lower in priority. (C)</p> Signup and view all the answers

What is a subordination agreement?

<p>A contract that allows a later-recorded mortgage to have priority. (D)</p> Signup and view all the answers

What happens if a property owner does not pay their municipal utility bills?

<p>A municipal utility lien can be placed on their property. (D)</p> Signup and view all the answers

When might a homeowner need a subordination agreement?

<p>When refinancing a mortgage to maintain priority. (A)</p> Signup and view all the answers

What can be the first step taken by tax authorities if property taxes are not paid?

<p>They will send delinquency notices. (C)</p> Signup and view all the answers

What are ad valorem taxes based on?

<p>The assessed value of real estate. (A)</p> Signup and view all the answers

Which of the following statements is true about general liens?

<p>They can be transferred to other acceptable collateral. (D)</p> Signup and view all the answers

How can a seller clear liens from their property before closing?

<p>By convincing the lender to release the lien. (A)</p> Signup and view all the answers

Why might a property owner lose ownership of their property?

<p>If they fail to pay their taxes. (C)</p> Signup and view all the answers

What distinguishes an IRS tax lien from a property tax lien?

<p>An IRS tax lien is a general lien affecting all properties owned by the individual. (A)</p> Signup and view all the answers

What happens if lien priority is not established during a foreclosure?

<p>Liens without priority may not get paid if proceeds are insufficient. (A)</p> Signup and view all the answers

What is a special assessment district?

<p>A defined area where public improvement costs are charged. (A)</p> Signup and view all the answers

What distinguishes a domestic support lien?

<p>It targets individuals who owe child support. (D)</p> Signup and view all the answers

What occurs to a property and its liens during a transfer of ownership?

<p>Liens stay with the property. (D)</p> Signup and view all the answers

What is the primary purpose of special assessments?

<p>To fund public improvements that benefit specific properties. (D)</p> Signup and view all the answers

What happens if a special assessment is unpaid?

<p>A tax lien may be placed on the property. (C)</p> Signup and view all the answers

What can lead to a higher interest rate for junior liens?

<p>Lower priority in lien settlement (C)</p> Signup and view all the answers

How does the county tax assessor determine property value?

<p>By calculating the value through various assessments. (D)</p> Signup and view all the answers

What is a contract for deed?

<p>A sale agreement where the deed is transferred later. (A)</p> Signup and view all the answers

What can happen if a property owner continuously neglects to pay taxes?

<p>They may face foreclosure on their property. (D)</p> Signup and view all the answers

What does 'ad valorem' mean in Latin?

<p>According to value. (D)</p> Signup and view all the answers

What is the primary characteristic of a judgment lien?

<p>It is a general, involuntary lien. (C)</p> Signup and view all the answers

What action can a court take if a debtor does not pay a judgment?

<p>Issue a writ of execution. (C)</p> Signup and view all the answers

What is a writ of attachment used for?

<p>To avoid selling property pending resolution of a lawsuit. (B)</p> Signup and view all the answers

Which type of lien provides notice of a pending lawsuit on property?

<p>Lis pendens. (B)</p> Signup and view all the answers

Which of the following properties is typically exempt from an attachment lien?

<p>Tools used for trade or business. (B)</p> Signup and view all the answers

How long is a judgment lien valid before it needs to be renewed?

<p>10 years. (A)</p> Signup and view all the answers

How do estate taxes impact the distribution of a deceased person's assets?

<p>They must be paid before any inheritances are distributed. (B)</p> Signup and view all the answers

What happens if a taxpayer does not pay their IRS taxes?

<p>The IRS may place a federal tax lien against their property. (B)</p> Signup and view all the answers

What is the purpose of a surety bond in obtaining a writ of attachment?

<p>To ensure compensation for any losses to the debtor. (B)</p> Signup and view all the answers

A confession of judgment leads to what type of lien?

<p>Judgment lien. (D)</p> Signup and view all the answers

Which of the following is considered a statutory lien?

<p>Tax lien. (C)</p> Signup and view all the answers

Which of these is NOT an example of exempt property from attachment liens?

<p>Luxury watches. (B)</p> Signup and view all the answers

Which lien type is specifically used when property is needed to satisfy a deceased person’s debts?

<p>Estate lien. (C)</p> Signup and view all the answers

What is a key requirement for a judgment lien to be filed in multiple counties?

<p>The creditor must obtain a court certificate. (C)</p> Signup and view all the answers

Flashcards

Lien

A claim made by a creditor against a debtor's property as collateral.

Encumbrance

A claim or burden against property that affects its title.

Voluntary Lien

A lien created with the owner's agreement.

Mortgage

A common example of a voluntary lien; a loan for property purchase with a condition to forfeit ownership if the loan isn't paid.

Signup and view all the flashcards

Involuntary Lien

A lien placed on property without the owner's consent, via legal action.

Signup and view all the flashcards

General Lien

A lien that impacts both the real estate and personal property of the debtor.

Signup and view all the flashcards

Specific Lien

A lien that only affects a particular property, not the debtor's personal assets.

Signup and view all the flashcards

Lien and Sale

If a debtor defaults, lenders can foreclose on and sell property to recover the loan value.

Signup and view all the flashcards

Judgment Lien

A general, involuntary lien placed on a person's property by a court to satisfy a debt resulting from a lawsuit.

Signup and view all the flashcards

Voluntary Judgment Lien

A judgment lien agreed to by the debtor instead of through legal proceedings (confession of judgment).

Signup and view all the flashcards

Execution Lien

An involuntary lien resulting from a court order to seize and sell a debtor's property to pay a debt.

Signup and view all the flashcards

Attachment Lien

A general, involuntary lien placed on a person's property before a court judgment, to ensure they don't sell off assets.

Signup and view all the flashcards

Lis Pendens

A recorded notice that a lawsuit regarding property is pending.

Signup and view all the flashcards

Exempt Property

Property protected from attachment liens, often limited in value and based on type (tools, social security, etc.).

Signup and view all the flashcards

Deceased Person's Debt

Debts of a deceased person that must be paid from their assets.

Signup and view all the flashcards

Tax Lien

A lien imposed by a government entity for unpaid taxes.

Signup and view all the flashcards

Estate Tax

Tax on assets left behind after death, (inheritance tax).

Signup and view all the flashcards

Estate Tax Deductible Expenses

Expenses such as debt, funeral costs, taxes, and donations subtracted from an estate for tax purposes.

Signup and view all the flashcards

Federal Tax Lien

A general, involuntary lien by the IRS for unpaid federal income taxes.

Signup and view all the flashcards

Writ of Execution

Court order authorizing the seizure and sale of a debtor's property to settle debt.

Signup and view all the flashcards

Writ of Attachment

A court order seizing property before a judgment in a lawsuit.

Signup and view all the flashcards

Federal Tax Lien Release

The IRS removes a lien on your property if you pay the tax debt within 30 days or provide a bond guaranteeing payment.

Signup and view all the flashcards

Mortgage Lien

A lien secured against a property as collateral for a mortgage loan. This gives the lender the right to sell the property if payments aren't made.

Signup and view all the flashcards

Preferred Lien

A first mortgage lien, meaning it takes priority over other liens (except tax liens).

Signup and view all the flashcards

Mechanic's Lien

An involuntary lien placed on a property by a mechanic or material supplier if they are not paid for their work or materials.

Signup and view all the flashcards

Enhancement of Value Theory

The idea that a mechanic's lien is justified because their work or materials improved the value of the property.

Signup and view all the flashcards

Mechanic's Lien Filing Deadlines

Mechanics have a specific timeframe to file a lien, usually determined by the state. In Pennsylvania, it's within six months of work completion.

Signup and view all the flashcards

Pennsylvania Mechanic's Lien Requirements

In Pennsylvania, you must be directly involved with the property owner or contractor to file a mechanic's lien.

Signup and view all the flashcards

Vendor's Lien

An involuntary lien placed on a property by the seller when the buyer doesn't pay the full purchase price.

Signup and view all the flashcards

Vendor's Lien and Warrantee Deeds

Vendor's liens are often used with warrantee deeds, ensuring the seller has a claim on the property.

Signup and view all the flashcards

Vendor's Lien Enforcement

Unlike a mortgage, a vendor's lien is enforced by suing to have the property sold to recover the unpaid amount.

Signup and view all the flashcards

Vendor's Lien vs. Mechanic's Lien

Both involve unpaid debts on a property. Vendor's liens involve the sale of the property, while mechanic's liens involve improvement work.

Signup and view all the flashcards

What is a bail bond lien?

A specific, voluntary lien placed on real estate as security for bail when a property owner is accused of a crime.

Signup and view all the flashcards

Municipal Utility Lien

A claim placed on property by the municipality when the owner refuses to pay utility bills.

Signup and view all the flashcards

What are the types of real estate taxes?

Two main types of taxes: Special assessments (improvement taxes) and Ad valorem taxes (assessed value).

Signup and view all the flashcards

Special Assessments

Taxes on properties that benefit from public improvement projects like new sidewalks or curbs.

Signup and view all the flashcards

Ad Valorem Taxes

General property taxes calculated according to the assessed value of real estate.

Signup and view all the flashcards

Who imposes ad valorem taxes?

Various governmental bodies like counties, cities, towns, districts for parks, hospitals, water, and schools.

Signup and view all the flashcards

Tax Assessment

The county tax assessor calculates the property's value NOT necessarily the same as the market value.

Signup and view all the flashcards

Consequences of Unpaid Taxes

Delinquency notices, tax lien placement, and ultimately foreclosure if taxes remain unpaid.

Signup and view all the flashcards

What is the difference between Ad Valorem and IRS Tax Liens?

Ad valorem liens are specific to the property, while IRS liens are general and affect all the individual's assets.

Signup and view all the flashcards

Special Assessment Districts

Defined areas where improvement projects are undertaken, and residents pay special assessments.

Signup and view all the flashcards

Voluntary Special Assessments

When homeowners request public improvements and agree to share the costs.

Signup and view all the flashcards

Prorated Assessment

Dividing the special assessment cost based on each property's benefit from the improvement.

Signup and view all the flashcards

Commercial Broker Lien

A lien placed on a property to recover unpaid commission owed to a commercial broker.

Signup and view all the flashcards

Domestic Support Lien

A lien placed on a property to collect child support owed by the property owner.

Signup and view all the flashcards

Lien Priority

The order in which liens against a property are settled during foreclosure.

Signup and view all the flashcards

Senior Lien

A lien that has higher priority than other liens on the same property.

Signup and view all the flashcards

Junior Lien

A lien that has lower priority than other liens on the same property.

Signup and view all the flashcards

Subordination Agreement

A contract allowing a later-recorded mortgage to take priority over an earlier recorded mortgage.

Signup and view all the flashcards

Highest Priority Lien

The lien that gets paid first during foreclosure because it has the highest priority.

Signup and view all the flashcards

Refinancing

Replacing an existing mortgage with a new one, often with better terms.

Signup and view all the flashcards

Home Equity Loan

A loan secured by the equity in a home.

Signup and view all the flashcards

Transfer of Liens

When ownership of a property changes, the existing liens often transfer to the new owner.

Signup and view all the flashcards

Lien Release

A document removing a lien from a property, often after the debt is paid.

Signup and view all the flashcards

Study Notes

Liens as Encumbrances

  • A lien is a creditor's claim against property (real or personal) used as collateral by a debtor.
  • Liens are considered encumbrances because they affect the title to the property.
  • Some liens allow the creditor to foreclose on the property if the debtor defaults. This foreclosure process can be immediate or involve a lawsuit.
  • Liens significantly impact property title, affecting the sales process.

How Liens Affect a Sale

  • Real estate liens attach to a specific property.
  • The property owner must either pay off the lien before closing or the buyer must accept the lien.

Voluntary and Involuntary Liens

  • Voluntary liens are created with the property owner's consent.
  • A mortgage is a common example of a voluntary lien. It involves a loan for property purchase with the condition of creditor taking ownership if borrower defaults.
  • Involuntary liens arise through legal action without the owner's consent.
  • Example involuntary liens are tax liens and judgment liens.

General and Specific Liens

  • General liens can apply to a person's real and personal property.
  • Specific liens apply only to a particular piece of property

General Liens

  • Judgment liens: Result from court judgments, applying to both real and personal property. They are held against the loser of a lawsuit up to 10 years or longer if renewed.
  • Estate and inheritance tax liens: Apply to assets of deceased persons.
  • IRS tax liens: For unpaid federal income taxes, and apply to all property owned.
  • Deceased person's debt: Liens placed on the assets of a deceased person to cover their debts.

Execution Liens

  • A writ of execution is a court order to seize and sell a debtor's property to satisfy a judgment debt.
  • This is an involuntary lien.

Attachment Liens

  • An attachment lien is placed on property to secure a potential judgment in a lawsuit.
  • The plaintiff must post a surety bond or deposit to cover potential losses for the defendant.
  • Attaches to all property except homestead.

Lis Pendens Notice

  • A lis pendens is a public record notice that a lawsuit concerning a property is pending.
  • It warns potential buyers of a possible claim against the property.

Exempt Property

  • Some property is exempt from attachment liens. Exemptions vary by state but often include tools, Social Security benefits, basic household items, and certain wages.

Tax Liens

  • Tax liens are imposed by government entities for unpaid taxes (statutory).
  • Real estate professionals should refer clients to tax advisors for specific tax issues.

Estate and Inheritance Taxes

  • Estate taxes apply to assets left by a deceased person.
  • Deductible expenses from the gross estate value include debt, funeral costs, state death taxes, and charitable giving.

Mortgage Liens

  • Mortgages are common voluntary specific liens.
  • Lenders prioritize mortgage liens (typically the first mortgage) over other liens except tax liens.

Mechanic's Liens

  • Mechanic's liens are involuntary, specific liens for unpaid labor or materials for property improvement.
  • They are based on the enhancement of value theory—the idea that the property’s value increased due to the labor or materials.

Vendor's and Vendee's Liens

  • A vendor's lien applies when a buyer doesn't pay the full purchase price.
  • Vendee's liens protect buyers when sellers fail to transfer title.

Bail Bond Liens

  • Bail bonds can be secured by real estate if owners are accused of crimes.

Municipal Utility Liens

  • Municipalities can place liens on properties for unpaid utility bills.

Ad Valorem Taxes (Property Taxes)

  • Ad valorem taxes are based on the assessed value of the property; they are a specific, involuntary, statutory lien.
  • Taxing authorities impose these locally.

Special Assessments

  • Special assessments are taxes for public improvements benefiting the property.
  • They can be voluntary or involuntary.
  • Assessments are statutory and specific and applied to the affected properties.

Priority of Liens

  • Lien priority determines the order of payment if a property is foreclosed.
  • Generally, liens are prioritized by date of recording, but tax liens often have higher priority.

Senior and Junior Liens

  • Senior liens have higher priority than junior liens.

Subordination Agreements

  • Subordination agreements change the priority of liens, allowing a later lien to have higher priority.

Terminating Liens

  • Liens can be cleared by paying the debt, transferring a lien to alternate collateral, or having them nullified with a property sale (or other relevant actions).

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Description

Test your knowledge on liens and their impact on property sales. This quiz covers both voluntary and involuntary liens, their effects on property title, and the foreclosure process. Understand how these claims affect real estate transactions.

More Like This

9.D.3 General and Specific Liens Flashcards
13 questions

9.D.3 General and Specific Liens Flashcards

EffortlessGyrolite7402 avatar
EffortlessGyrolite7402
Quiz 4
13 questions

Quiz 4

RestfulGoblin5783 avatar
RestfulGoblin5783
Use Quizgecko on...
Browser
Open
Browser
Browser