ch 9-12 Flashcards
(210 cards)
1
Q
what is an encumbrance
A
is an interest in and right to seal property that limits the legal owner’s freehold interest (most common are liens and easements)
2 types: those that affect legal ownership, value and transfer and those that affect the property’s use
2
Q
what is a lien
A
is a creditor’s claim against personal or real property as security for a debt of the property owner. if the owner defaults the lien gives the creditor the right to force the sale of the property to satisfy the debt. (write of execution)
legal features:
DOES not convey ownership, with the exception of a mortgage lien
ATTACHES to the property
MAY be subject to multiple liens
TERMINATES on payment of the debt and recording documents
3
Q
voluntary vs involuntary lien
A
A property owner may create a voluntary lien to borrow money or some other asset secured by a mortgage
AN involuntary lien is one that a legal process places against a property regardless of the owner’s desires
4
Q
statutory lien vs equitable lien
A
STATUTORY lien is imposed by law
EQUITABLE lien is imposed by court action
5
Q
general vs specific lien
A
A general lien is one places against any and all real and personal property owned by a particular debtor
A specific lien attaches to a single item or real or personal property and does not affect other property owned by the debtor
6
Q
what is a judgement lien
A
a judgement lien results from a lawsuit. it attaches to real and personal property as a result of a money judgement issuedby court in favor of a creditor. a judgement is a lien against the property for ten years and can be renewed and extended for additional periods of time
7
Q
what is lis pendens
A
is a legal document giving notice of an action that has been filed against a parcel of property. a notice of lis pendens is NOT the same as placing a lien on a property
8
Q
what is a state inheritance tax liens
A
are general liens that arise from taxes owed by a decedent’s estate.
ARE determined by probate (first step in administering estate of deceased)
9
Q
what is a federal estate tax
A
is also imposed when the property transfers from the estate of the deceased person to the beneficiary
10
Q
what is a corporation franchise tax
A
is levied on corporations for doing business in the state. this tax is based on the net profit of the business and if it is not paid, it becomes a lien on all the property, both real and personal, that the corporation owns
11
Q
internal revenue service (IRS)
A
can create a lien for failure to pay any personal federal income taxes or any taxes relating to income, such as employee withholding tax, federal unemployment tax, FICA, or self-employment taxes
12
Q
real estate tax lien or ad valorem tax lien
A
the local legal taxing authority annualy places this against properties as security for payment of the annual property tax. according to ny law a real property tax liens has priority over all other liens
13
Q
what is a mortgage lien
A
is a voluntary lien. lenders usually require a first mortgage lien. this means that no other liens on the property will take priority over the mortgage except for the property tax lien
14
Q
what is a mechanic’s lien
A
secures the cost of labor, materials, and supplies incurred in the repair or construction of real property improvements. If a property owner fails to pay for work performed or materials supplied, a worker or supplier can file a lien to force the sale of the property and collect the debt
WHEN placed within 4 months of the completion of work on a single dwelling and within eight months on other buildings. the lien will expire in one year from the filing, but it can be renewed
15
Q
superior or senior liens vs. inferior or junior liens
A
superior liens receive first payment from the proceeds of a foreclosure
2 factors determine lien priority
1 the lien’s categorization of superior or inferior
2 the date the lien was recorded
SUPERIOR liens in their rank order real estate tax special assessment federal estate tax state inheritance tax
JUNIOR liens in their rank order federal income tax state corporate income tax state intangible tax judgment mortgage vendor's mechanic's (priority date work was performed)
ALL superior liens take precedence over all junior liens regardless of recording date. among junior liens, date of recording determines priority. except mechanic’s lien is priority of date work was performed
A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien’s position in the hierarchy
16
Q
What is an easement
A
is an interest in real property that gives the holder the right to use portions of the legal owner’s real property in a defined way. A common term for an easement is a right of way
17
Q
what is an easement appurtenant
A
it gives a property owner a right of usage to portions of an adjoining owned by another party. the property enjoying the usage right is called the Dominant tenement. the property containing the physical easement itself is the Servient tenement, since it must serve the easement use
RIGHTS and obligations automatically transfer with the property upon transfer of either the dominant or servient estate, whether mentioned in the deed or not
18
Q
what is an easement by necessity
A
it is an easement appurtenant granted by court of law to a property owner because of a circumstance of necessity, most commonly the need for access to a property
19
Q
what is a party wall
A
is a common wall shared by two separate structures along a property boundary. Party wall agreements generally provide for severalty ownership of half of the wall by each owner
20
Q
what is an easement in gross
A
is a personal right that one party grants to another to use the grantor’s real property. the right does not attach to the grantor’s estate. A personal easement in gross is granted for the grantee’s lifetime
21
Q
what is a commercial easement in gross
A
is granted to a business entity. the duration of the commercial easement is not tied to anyone’s lifetime. the right may be assigned, transferred, or willed
22
Q
an easement may be created by..
A
Voluntary action necessity prescriptive operation of law grant or reservation implication govt power of eminent domain (condemnation)
23
Q
easement may be terminated by..
A
express release merger purposeful abandonment condemnation change or cessation of the purpose destruction of an easement structure non-use of an easement by prescription
24
Q
what is appurtenances
A
are all rights privileges and improvements that belong to and pass with the transfer of a property but are not necessarily a part of the actual property. these rights pass to the succeeding owners, even if they are not specified in the deed
25
what is profit
is the right to take part of the soil and produce of the land, such as the right to take coal, fruit, or timber
26
what is a license
much like a personal easement in gross, is a personal right that a property owner grants to another to use the property for a specific purpose. licenses are not transferable and do not attach to the land
27
what is an encroachment
is the unauthorized, physical intrusion of one owner's real property into that of another. encroachments cause infringements on the rights of the trespassed owner, and may diminish the property's value, particularly when the property is to be sold. an owner may sue for removal of an encroachment or for compensation for damages
28
what is deed restriction
property owner who is selling land puts a deed restriction on the land to control how it is used in the future
29
what is alienation
is transfer of title to real estate occurs voluntarily and involuntarily
VOLUNTARILY alienation is an unforced transfer of title by sale or gift from an owner to another party
INVOLUNTARILY alienation is a transfer of title to real property without the owner's consent
30
what is a deed
is a legal instrument used by an owner to transfer title to real estate voluntarily to another party
GRANTOR the person who transfers the title to real property
GRANTEE the person who receives the property from the grantor
ACT of conveyance expresses the grantor's present desire and intention to transfer legal title to the grantee
FOR deed to convey title it must be accepted by grantee. deed becomes valid upon delivery and acceptance by the grantee
31
what is consideration
is something of value bargained for in exchange of the real estate. Money is the most common form of consideration, but other consideration of value, such as other property in exchange, or a promise to perform (i.e. a promise to pay) is also satisfactory.
32
what is legal description
accurately locates and identifies the boundaries of the subject parcel of property to a degree acceptable by courts of law in the state where the property is located. principle purpose for description to create a consistent unchanging standard for locating the property.
REQUIRED for:
Public recording
Creating a valid deed of conveyance or lease
Completing mortgage documents
Executing and recording other legal documents
3 accepted methods of legally describing parcels of real estate are:
Metes and bound
Rectangular survey system or govt survey method
Lot and block method, or recorded plat method
33
what is habendum clause
describes the type of estate being conveyed and declares extent of interest conveyed
Transfer a piece of real estate with no restrictions
May extend the time a lesser can operate on a piece of land
34
what is designation of limitation
limitations spelled out in the deed
35
what is exemptions and reservations affecting the title
a subject to clause
| Certain contingencies are met then the contract becomes binding
36
what is a signature of the grantor
must be signed by the grantor but not necessarily by the grantee
37
what is delivery and acceptance of the deed
necessary for title to pass
38
what is acknowledgement
is the declaration by the grantor before a notary or other authorized person that the grantor's identity and signature are genuine and that the deed execution was a free voluntary act. Important because a deed w/o an acknowledgement might endanger a person's claim to a property
39
what is recording
not necessary but gives the public constructive notice of the grantee's ownership
40
what is metes and bounds description
identifies the boundaries of a parcel of real estate using reference points, distances, and angles. the description always identifies an enclosed area by starting at an origination point, called point of beginning, or POB, and returning to the POB at the end of the description. A metes and bounds description must return to the POB in order to be valid
41
what is the rectangular survey system or govt survey method
simplifies and standardizes property descriptions as a replacement for the cumbersome and often inaccurate metes and bounds method. The rectangular survey system works well for describing properties that are square or rectangular in shape, this system is based on sets of intersecting lines
DIVIDES a township into thirty-six squares called sections. the area of a section is one square mile, or 640 acres
42
what are principals meridians
run north and south
43
what are base parallels
run east and west
44
what are townships
is the area enclosed by the intersection of two consecutive meridians and two consecutive parallels. its area is therefore 36 square miles
45
what is a lot and block system or plat method
is used to describe properties in residential, commercial, and industrial subdivisions
UNDER this system, tracts of land are subdivided into lots. the entire subdivision is surveyed to specify the size and location of each lot and block. the surveyor then incorporates the survey data into a plat of survey or subdivision plat map, which must comply with local surveying standards and ordinances
46
what is a full covenant and warranty deed
is the deed most used in real estate transfers and offers the greatest protection of any deed.
THE five basic covenants are:
1 covenant of seizen- assures that the grantor owns the estate to be conveyed and has the right to do so
2 covenant against encumbrances- assures that there are no encumbrances on the property except those specifically named in the deed
3 covenant of quiet enjoyment- assures that the grantee will not be disturbed by third party title disputes
4 covenant of further assurance- assures that the grantor will assist in clearing any title problems discovered later by obtaining and delivering and instrument needed to make the title good
5 covenant of warranty forever- this covenant assures that the grantee will receive good title, and that the grantor will assist in defending any claims to the contrary
47
what is a bargain and sale deed with covenants
the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor's ownership or trusteeship. The deed does not protect the grantee against claims that predate the owner's period of ownership
48
what is a bargain and sale deed without covenants
the grantor covenants that the title is valid but does not warrant against encumbrances or promise to defend against claims by other parties
49
what is a quitclaim deed
transfers real and potential interests in a property whether an interest is known to exist or not. the grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee. used to clear title rather than convey it
Does not guarantee the property in I encumbered (like a warranty deed)
Usually used to transfer interest to divorce or children
50
what is an executor's deed or personal representative's deed
a personal rep deed issued by an executor to convey a decedent's estate
51
what is a referee's deed
is used in bankruptcies and foreclosures
52
what is a sheriff's deed
transfer property at a public foreclosure at sheriff's auction
53
what is a deed of trust
used to convey property to a third party trustees as collateral for a loan
54
what is a will or last will and testament
is a legal instrument for the voluntary transfer of real and personal property after the owner's death
55
who does a testator name to oversee the settlement of the estate
executor- male or executrix-female
56
what is probate
a court proceeding generally settles a decedent's estate, whether the person has died testate (having left a valid will) or intestate(having failed to do so)
THE probates courts's objectives are to:
Validate the will, if one exists
Identify and settle all claims and outstanding debts against the estate
Distribute the remainder of the estate to the rightful hers
IF the decedent died without a valid will, the estate passes to lawful heirs according to the state's laws of descent and distribution or succession. laws of descent also known as title by descent stipulate who inherits and what share they receive without regard to the desires of the heirs or the intentions of the deceased
IF and intestate decedent has no heirs, the estate escheats, or reverts, to the state or county after all claims and debts have been validated and settled
57
what is an adverse possessor
state laws may allow a real property owner to lose legal title to this. is someone who enters occupies and uses another's property without the knowledge or consent of the owner, or with the knowledge of an owner who fails to take any action over a statutory period of time. to avoid property owner has to inspect property and evict trespassers or sue to quiet title
TO claim legal title, the adverse possessor must:
Be able to show a claim of right or color of title as reason for the possession (an instrument that purports to transfer ownership of property but does not due to defect
Have notorious possession, which is possession without concealment
Maintain a consisten claim of hostile possession, which is a claim to ownership and possession regardless of the owner's claims or consent
Occupy the property continuously for a statutory period of time
In some states, pay taxes
58
what is accession rights
are those rights that property owners have everything that is produced by their land, whether it happens intentionally or not
59
why might a property's boundaries change over time
Accretion- the gradual addition of land by alluvial deposits of soil
Avulsion- the loss of land as a result of its being washed away
Reliction- the gradual receding of water from its usual watermark
60
what does the granting clause of a deed do
in expresses the grantor's present desire and intention to transfer legal title of a piece of real property to the grantee
61
what does the phrase dedication by deed mean
when a subdivision developer turns the subdivision road or the common ground in the subdivision over to the local government, he or she does so by what's known as dedication or dedication by deed
62
what happens at the title closing
it's the culmination of the real estate transaction
PRIMARY attendees at the closing are:
Buyer-pays for the property and receives a clear title
Seller-conveys the property and receives payment. delivers the title
Closing agent-prepares all the documents that need to be signed at the closing, including the actual settlement statements that show all the debits and credits assigned to the buyer and seller in the transaction
After buyer and seller verify that the contract terms have been fulfilled..
The mortgage loan if any closes
Any existing liens on the property are satisfied
The buyer pays the purchase price for the property. This payment is often a combination of the mortgage funds and the buyer's own funds. does not have to pay for fee for clearing title
Each party pays all the appropriate fees associated with his or her side of the transaction
The seller delivers the title
The deed is the most important document at closing, since it transfers the property to the purchaser. Recording the deed to a property gives an owner protection from any other titles to the property that are not recorded in the public record. This is done through constructive notice
A seller is required to deliver a marketable title at closing. In order to deliver a marketable title, the seller must have proof of ownership of the property also known as evidence of title
An abstract of title is written, chronological summary of the property's title records and other public records affecting rights and interests in the property
Accepting referral fees could be a violation of nys license law
Debit money that buyer or seller pays at closing
escrow agent will subtract the seller's total debits from the total credits and arrive at what the seller will receive at closing
63
what is title insurance
is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property and from the invalidity or unenforceable of mortgage loans.
Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate.
64
what is the real estate settlement and procedures act (RESPA)
requires that the parties to certain transactions receive the correct figures pertaining to their closing costs
LENDERS have very specific requirements under RESPA:
A lender must give a copy of a HUD booklet called settlement Costs and You to the applicant
The lender must give the applicant a "good faith estimate" of the closing costs that would be expected in the transaction
RESPA requires lender to use the uniform settlement statement (HUD Form-1) used for itemizing closing costs. RESPA specifically prohibits any payment or receiving of fees or kickbacks when a service has not been rendered. does not apply to seller financed loan
65
what is a closing statement
it is a detailed accounting of the transaction that is prepared before closing by the closing agent. the statement shows all cash received, all charges and credits made and all cash paid out
It is a list of all debits and credits for both the buyer and the seller
66
what is the real estate transfer tax
is a tax imposed on any deed or instrument which conveys interest in real property in NYS. the amount of the tax is based on how much money the seller gets in the transaction
67
What is the NYC Real Property transfer Tax (RPTT)
in addition to the state transfer tax, sellers who sell residential property in NYC will have to pay this additional tax 1% of purchase price under $500k if over $500k than 1.425%
68
what is the real property transfer report
it is required by the nys office of real property. this form documents the info about property transfers within the state
69
what mortgage recording tax
mortgages that are recorded in ny are assessed a mortgage recording tax. the tax is made up of several taxes added together and are based on the taxes that are in effect in the county or city where the property is located. this tax is paid by the buyers
70
what is prorated
some expenses paid at closing is divided proportionately between the buyer and the seller. any item that is prorated is shown on the settlement statement as a debit to one party and a credit to the other party for the same amount. title fees are not usually prorated
71
what happens when some items are paid in advance by seller
the buyer will owe the seller part of the payment so the buyer will receive a debit and the seller will receive a credit
72
other expenses seller incurred but have not paid yet
these items are paid in arrears (accrued expenses). so the settlement statement the buyer will get a credit and the seller will get a debit.
73
prorating methods
The 12 month/30 day method calculates the amounts due based on a 360 day year and a 30 day month
The 365 day method calculates the amounts on the basis of a 365 day year
74
what role does the broker play before and during closing
many times the broker is involved in ordering inspections, surveys or appraisals. the broker can also help the buyer find a mortgage lender or help schedule needed repairs to the property. just prior to closing the broker or agent should conduct a walk through or final inspection of the property with the buyer. on the date of closing, the broker may be the closing agent, may be present to collect the commission check, or may not be present at all
75
jan cook purchases a property for $625,000 in upstate new york. what will be the amount of her real estate transfer tax
.4% of purchase price is transfer tax
76
what does the foreign investment in real property tax act (FIRPTA) require a seller and a buyer to do
any seller who is not a us citizen must deliver a FIRPTA certificate to the buyer. the buyer must withhold estimated taxes equal to 10% of the sale price in any sale or exchange of property owned by a foreigner
77
list 3 items that the buyer usually pays for at closing
Appraisal and credit reports
Inspections
Mortgage recording fees
78
sally and sam have sold their home to tina and max. the closing is set for august 23. the insurance policy of $1,700 was prepaid. using the 12 month/30 day method, what will be tina and max share of the insurance expenses and how will it be handled on the settlement statement
$1,700/12 = $141.67
$141.67/30 = $4.72
seller - $141.67x7 = $991.69 $472x23 = $108.56
$991.69+$108.56 = $1,100.25
Buyer - $1,700-$1,100.25 = $599.75 will be credited to the seller and debited to the buyer
79
paul will get the second quarter water bill at the end of june. the bill is $39.00 per quarter. if closing is on may 7 what will be paul's share of the bill
$39/91 days = $.43 per day
| $.43x54 days (paul's share of the 91 days) = $23.22
80
what is a lease
is an instrument of conveyance and a contract between principal parties to uphold certain covenants and obligations. the legal essence of a valid lease is that it conveys an exclusive right to use and occupy a property for a limited period of time in exchange for rent and the return of the property after the lease term is over
In a lease arrangement the owner is the landlord or lessor and the renter is the tenant or lessee
81
what are 4 basic leasehold estates
Estate for years: defined beginning date and ending date for a term. no notice to vacate is required ending date is when tenant should vacate the property (no auto renewal)
Estate from period to period (periodic estate): no specific ending date is defined but there is an agreed upon term such as month-month. so notice must be given to vacate
Estate at will: no specific period for tenancy (such as month to month)
Estate at sufferance: stays in possession of a property after lease has expired or been legally terminated (holdover tenant)
82
the covenants (agreements or promises) in the lease are very important. The following 8 covenants are essential in NY lease
```
Capacity to contract
Demising clause:when tenants takes control of property
Description of the premises
Clear statement of term
Specification of rent and how it is to be paid
In writing
Signatures
Delivery
```
All ny leases are considered to have an implied warranty of habitability. this means that the landlord is guaranteeing that the leased property is fit to be inhabited by humans and is safe and sanitary
In ny a lease may not limit the occupancy of a unit to the tenant named on the lease and his or her immediate family. the unit may be shared with one additional occupant and that person's dependent children
83
in ny rent regulation is administered by the nys division of housing and community renewal (DHCR) they administers two programs
rent control
rent stabalization
several laws that govern rent regulations including the emergency tenants protection act of 1974 (ETPA)
MBR in nyc rent to be adjusted every 2 yrs
84
security deposits
must be kept by the owner in an interest bearing a account in a nys bank. the owner must notify the tenant of the name and address of the bank and pay the tenant the full annual interest, less 1% of the security deposit per year for the owner's administrative costs
85
a sublease vs an assignment of the lease
A sublease is the transfer by a tenant of a portion of the leasehold interest to another party (original tenant retains primary responsibility for performance of the original lease context)
An assignment is a transfer of the entire leasehold interest by a tenant to a third party
86
a lease may terminate for any of the following causes
```
Term expiration
Notice
Voluntary agreement
Property destruction
Condemnation
Foreclosure
Breach of contract
```
87
a gross lease
requires the landlord to pay the property's operating expenses, including utilities, repairs, and maintenance, while the tenant pays only rent
88
a net lease
the tenant pays not only the rent for occupancy, but also pays maintenance and operating expenses such as taxes, insurance, utilities and repairs
89
graduated lease
the rent payments start at a fixed amount but increase as the lease term matures
90
a ground lease or land lease
concerns the land portion of a real property. the owner grants the tenant a leasehold interest in the land only, in exchange for rent
91
percentage lease
is a lease whose rental is based on a percentage of the monthly or annual gross sales made on the site (recapture clause)
92
a proprietary lease
conveys a leasehold interest to an owner of cooperative
93
an index lease
provides for the adjustment of rent according to changes in a price index
94
which type of leasehold estate is commonly referred to as a periodic tenancy
estate from period to period
95
what are a tenant's primary obligations when leasing a property
Pay the rent on time
Maintain the property's condition
Comply with the rules and regulations of the building
96
in rent controlled properties under what circumstances could the landlord raise the rent
He installs a major capital improvement
he increases services
there is a case of hardship
labor and fuel costs have increased
97
Most liens do not convey ownership. What is the one exception to that rule?
A mortgage lien conveys legal title to the lender.
98
The county water department has a pipeline running under owner Fred's backyard. This type of easement is most likely a
commercial easement.
99
Rancher Norm is allowed to bring his cattle onto the neighbor's property to access a public water source. What type of easement does Norm have?
Easement by implication
100
A quitclaim
can remove a cloud from the title.
101
Greg and Joyce purchased a home from the builder who offered to pay $5,000 at closing as an incentive to get them to buy. What kind of mortgage will they get?
A buydown mortgage.
102
Most liens do not convey ownership. What is the one exception to that rule?
A mortgage lien conveys legal title to the lender.
103
What is a judgment lien and how long does it last?
A judgment lien results from a lawsuit. It attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor. It lasts for ten years and can be renewed.
104
What is a corporation franchise tax and on what is it based?
A tax levied on corporations for doing business in the state. This tax is based on the net profit of the business and if it is not paid, it becomes a lien on all the property, both real and personal, that the corporation owns.
105
What type of lien takes priority over all other liens?
Real property tax lien
106
How can the priority order of a junior lien be changed?
A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien's position in the hierarchy.
107
What are the two basic types of easement and what is the difference?
Easement appurtenant & Easement in gross
An easement appurtenant attaches to the estate and transfers with it unless specifically stated otherwise in the transaction documents, while the easement in gross is a personal right to use and does not attach to the grantor's estate
108
What is a common example of an easement by necessity?
The need for access to a property so that it is not landlocked.
109
How are easements created?
```
Voluntary action
Necessity
Prescriptive operation of law
Grant or reservation
Implication
Government power of eminent domain (condemnation)
```
110
Define encroachment and give an example.
An encroachment is the unauthorized, physical intrusion of one owner's real property into that of another. An example would be a driveway extending beyond the lot line onto the neighbor's land.
111
what a re the two general type of encumberances
The two general types of encumbrance are those that affect legal ownership, value and transfer and those that affect the property's use.
112
Liens
A lien does not convey ownership (except mortgage liens), attaches to the property and terminates on payment of the debt and recording of documents. A property may be subject to multiple liens.
113
voluntary lien vs involuntary lien
A property owner may create a voluntary lien to borrow money or some other asset secured by a mortgage. An involuntary lien is one that a legal process places against a property regardless of the owner's desires.
114
statutory lien vs equitable lien
If statutory law imposes an involuntary lien, the lien is a statutory lien. If court action imposes an involuntary lien, the lien is an equitable lien.
115
general vs specific lien
A general lien is one placed against any and all real and personal property owned by a particular debtor. A specific lien attaches to a single item of real or personal property, and does not affect other property owned by the debtor.
116
judgment
A judgment is a lien against the property for ten years.
117
lis pendens
Lis pendens is a legal document giving notice of an action that has been filed against a parcel of property.
118
Estate and Inheritance Tax Liens
arise from taxes owed by a decedent's estate
119
Corporation Franchise Tax
Based on the net profit of the business and if it is not paid, it becomes a lien on all the property.
120
Internal Revenue Service Liens
for failure to pay any taxes relating to income.
121
Real Property Tax Lien
Ad valorem tax lien against properties as security for payment of the annual property tax. A real property tax lien has priority over all other liens.
122
Mortgage Lien (voluntary)
The borrower gives the lien to the lender as security for the loan on the property.
123
Superior liens
Special Assessment Lien (Superior/Senior)
State Intangible Tax Lien (Inferior/Junior)
Vendor's Lien (Inferior/Junior)
Municipal Utility Lien (Inferior/Junior)
124
Two factors primarily determine lien priority:
The lien's categorization as superior or junior.
The date the lien was recorded.
A junior lien is automatically inferior, or subordinate, to a superior lien. Among junior liens, date of recording determines priority.
A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien's position in the hierarchy.
125
Deed Restrictions
A developer may place restrictions on all properties within a recorded subdivision plat.
A condition can only be created within a transfer of ownership. A covenant can be created by mutual agreement.
126
Easements
An easement is a non-possessory interest in property owned by someone else. The affected area must be defined. One cannot own an easement over one's own property.
127
Easement Appurtenant
gives a property owner a right of usage to portions of an adjoining property owned by another party.
Transfer - Easement appurtenant rights and obligations automatically transfer with the property upon transfer of either the dominant or servient estate, whether mentioned in the deed or not.
Non-Exclusive Use - The servient tenement may use the easement area, provided the use does not unreasonably obstruct the dominant use.
128
Easement by Necessity
granted by a court of law to a property owner because of a circumstance of necessity, most commonly the need for access to a property.
There must have been a common grantor of the dominant and servient estates and a reasonable necessity for the easement, not just for convenience.
129
Light and air easement
is a type of negative easement. This easement prevents an adjoining land owner from building any structure that would obstruct the passage of light or air from reaching the dominant land.
130
party wall
is a common wall shared by two separate structures along a property boundary.
131
easement in gross
is a personal right that one party grants to another to use the grantor's real property. The right does not attach to the grantor's estate.
Personal - granted for the grantee's lifetime.
Commercial - granted to a business entity rather than a private party. The duration is not tied to anyone's lifetime.
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An easement may be created in six ways:
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Voluntary Action
Necessity
Prescription
Adverse and hostile use
Open and notorious use
Continuous use (ten years)
Grant
Implication
Condemnation
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133
Easements terminate by:
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Express release of the right
Merger
Purposeful abandonment
Condemnation
Change or cessation of the purpose
Destruction
Non-use
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Appurtenances
Profit is the right to take part of the soil and produce of the land, such as the right to take coal, fruit, or timber.
A license is a personal right that a property owner grants to another to use the property for a specific purpose.
An encroachment is the unauthorized, physical intrusion of one owner's real property into that of another.
135
5 of 9 - What type of action might a creditor take to force the sale of attached property to collect a debt?
Writ of execution
136
What is the difference between voluntary and involuntary alienation?
Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party. Involuntary alienation is a transfer of title without the owner's consent.
137
What does the granting clause of a deed do?
It expresses the grantor's present desire and intention to transfer legal title of a piece of real property to the grantee.
138
What action is necessary for a title to a property to pass to the grantee?
It is necessary for the deed to be delivered to and accepted by the grantee for title to pass.
139
Why is an acknowledgement important if it is not needed to make a deed valid?
The acknowledgement is required for the deed to be recorded. So a deed without an acknowledgement might endanger a person's claim to a property.
140
What situations require a legal description?
A legal description is required for:
Public recording
Creating a valid deed of conveyance or lease
Completing mortgage documents
Executing and recording other legal documents
141
What does a metes and bounds legal description do?
Identifies the boundaries of a parcel of real estate using reference points, distances, and angles.
142
In the rectangular survey method, how large is a township in square miles and how large is a township section?
A township is 36 square miles and a section is one square mile or 640 acres.
143
For what kinds of properties is the lot and block method most often used?
The lot and block system, also called the recorded plat method, is used to describe properties in residential, commercial, and industrial subdivisions.
144
What is important to know about a full covenant and warranty deed?
It is the deed most used in real estate transfers and offers the greatest protection of any deed. With this type of deed, the grantor gives certain covenants or warranties that promise the grantee will have ownership of the property that is unchallenged.
145
What is the negative aspect of a bargain and sale deed with covenants?
The deed does not protect the grantee against claims that predate the owner's period of ownership.
146
What is a quitclaim deed and what is probably its most common use?
With a quitclaim deed, the grantor makes no claim to any interest in the property being conveyed and offers no warrants to protect the grantee. It is often used in divorce settlements.
147
What does the phrase "dedication by deed" mean?
When a subdivision developer turns the subdivision road or the common ground in the subdivision over to the local government, he or she does so by what's known as dedication or dedication by deed.
148
What does a probate proceeding do?
Validates the will, if one exists.
Identifies and settles all claims and outstanding debts against the estate.
Distributes the remainder of the estate to the rightful heirs.
149
What happens if a person dies intestate?
If there are heirs, the estate will pass to them according to title by descent or the state's laws of succession. If there are no heirs, the estate will go to the state or county after all claims and debts have been settled.
150
What is adverse possession?
The process by which an owner can lose title to his or her property because an adverse possessor entered, occupied, and used the property without the knowledge or consent of the owner, or with the knowledge of the owner who failed to take any action over a ten-year period.
151
Define the terms accretion and avulsion.
Avulsion is the loss of land as a result of its being washed away.
Accretion is the gradual addition of land by alluvial deposits of soil.
152
Voluntary alienation
Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party. Involuntary alienation is a transfer of title to real property without the owner's consent.
153
deed stuff
Grantor - The person who transfers the title to real property.
Grantee - The person who receives the property from the grantor.
Act of conveyance - Expresses the grantor's present desire and intention to transfer legal title to the grantee (granting clause).
Consideration - Valuable or good consideration.
Legal description - Accurately locates and identifies the boundaries of the subject parcel of property.
Habendum clause - Describes the type of estate being conveyed.
Designation of limitations - Limitations spelled out in the deed.
Exemptions and reservations affecting the title - A "subject to" clause.
Signature of the grantor - Must be signed by the grantor, but not necessarily by the grantee.
Delivery and acceptance of the deed - Necessary for title to pass.
Acknowledgement - A deed without an acknowledgement tends to endanger a person's claim to a property.
Recording - Not necessary, but gives the public constructive notice of the grantee's ownership.
154
Legal Descriptions
A legal description provides accuracy and consistency over time. It is required for:
Public recording
Creating a valid deed of conveyance or lease
Completing mortgage documents
Executing and recording other legal documents
155
Metes and Bounds
Identifies the boundaries of a parcel of real estate using reference points, distances, and angles. The description always identifies an enclosed area by starting at and returning to the POB.
156
Rectangular Survey System
Based on sets of intersecting lines principal meridians run north and south; base parallels run east and west.
Range - North-South area between consecutive meridians.
Tier - East-West area between two parallels.
Township - Area enclosed by the intersection of two consecutive meridians and two consecutive parallels.
157
Lot and Block System
Used to describe properties in residential, commercial, and industrial subdivisions.
158
Forms of Deeds
A full covenant and warranty deed is the deed most used in real estate transfers and offers the greatest protection of any deed. Covenant of seizen, against encumbrances, quiet enjoyment, further assurance and warranty forever
In a bargain and sale deed with covenants, the grantor warrants only against title defects or encumbrances not noted on the deed that may have occurred during the grantor's period of ownership or trusteeship.
In a bargain and sale deed without covenants, the grantor covenants that the title is valid but does not warrant against encumbrances or promise to defend against claims by other parties.
A quitclaim deed transfers real and potential interests in a property, whether an interest is known to exist or not.
An Executor’s deed is a personal representative's deed issued by an executor to convey a decedent's estate.
A referee's deed is used in bankruptcies and foreclosures.
159
Transfer Tax exemptions
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Transfer within the immediate family
Consideration less than a certain amount
Transfer between government entities or non-profit organizations
Trust deed transfer and reconveyance
Tax deed
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160
Conveyance After Death
A last will and testament is a legal instrument for the voluntary transfer of real and personal property after the owner's death. The property transferred by the will is the devise.
A will takes effect only after the testator's death. It is an amendatory instrument, meaning that it can be changed at any time during the maker's lifetime.
Witnessed - In writing and witnessed by two disinterested people.
Holographic - In the testator's handwriting, dated and signed.
Approved - On pre-printed forms meeting the requirements of state law.
Nuncupative - Made orally, and written down by a witness.
161
probate
A court proceeding called probate generally settles a decedent's estate, whether the person has died testate (having left a valid will) or intestate (having failed to do so).
If an intestate decedent has no heirs, the estate escheats to the state after all claims and debts have been validated and settled.
162
Adverse Possession
To claim legal title, the adverse possessor must meet all five criteria:
Be able to show a claim of right or color of title as reason for the possession.
Have notorious possession.
Maintain a consistent claim of hostile possession.
Occupy the property continuously for a statutory period of time.
In some states, pay taxes.
163
claim of right or Color of title
A claim of right is based on the adverse possessor's occupying and maintaining the property as if he were the legal owner. Color of title results when a grantee has obtained defective title, or received title by defective means, but occupies the property as if he or she were the legal owner.
164
Notorious possession and hostile possession
give constructive notice to the public, including the legal owner that a party other than the legal owner is occupying and claiming to own the property.
165
Avoiding Adverse Possession
by periodically inspecting the property within statutory deadlines and evicting any trespassers found.
166
Accession Rights
Rights that property owners have to everything that is produced by their land, whether it happens intentionally or not.
Accretion is the gradual addition of land by alluvial deposits of soil. This material added to the property through accretion is called alluvion.
Avulsion is the loss of land as a result of its being washed away.
Reliction is the gradual receding of water from its usual watermark.
167
What happens at the title closing?
The buyer completes his or her financing arrangements (referred to as closing the loan).
The seller transfers the title.
Both the buyer and seller pay the necessary taxes, fees and other charges.
168
What is the most important document at closing and why?
The deed is the most important document because it transfers the property to the purchaser.
169
Define the term "marketable title."
A marketable title is one that is so free of defects that the buyer is certain he or she will not have to defend the title.
170
What is an abstract of title?
A written, chronological summary of the property's title records and other public records affecting rights and interests in the property. It includes the property's chain of title and all current recorded liens and encumbrances, by date of filing.
171
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects his or her investment. Insurance for the lender protects the lender's interest in the property.
172
What role does the broker play before and during closing?
Many times the broker is involved in ordering inspections, surveys or appraisals. The broker can also help the buyer find a mortgage lender or help schedule needed repairs to the property. Just prior to closing, the broker or agent should conduct a walk through or final inspection of the property with the buyer. On the date of closing, the broker may be the closing agent, may be present to collect the commission check, or may not be present at all.
173
What does RESPA require lenders to give to borrowers?
The correct figures pertaining to their closing costs.
174
RESPA does not apply to what kinds of loans?
Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
175
What is the definition of a closing statement?
The closing statement is a detailed accounting of the transaction that is prepared before closing by the closing agent. The statement shows all cash received, all charges and credits made and all cash paid out.
176
Jan Cook purchases a property for $625,000 in upstate New York. What will be the amount of her real estate transfer tax?
$625,000 = $625 $625 x $4 = $2,500
| $1,000
177
What does the Foreign Investment in Real Property Tax Act (FIRPTA) require a seller and a buyer to do?
Any seller who is not a US citizen must deliver a FIRPTA Certificate to the buyer. The buyer must withhold estimated taxes equal to 10% of the sale price in any sale or exchange of property owned by a foreigner.
178
List three items that the buyer usually pays for at closing. (See other correct answers on screen 26.)
Appraisal and credit report fees
Inspections
Mortgage recording fees
179
If an item is paid for in advance by the seller, how will it be handled on the settlement statement?
The buyer will receive a debit and the seller will receive a credit.
180
What do you call those items that the seller has incurred but have not been paid and how will they be handled on the settlement statement?
These items are paid in arrears. The buyer will get a credit and the seller will get a debit.
181
Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The insurance policy of $1,700 was prepaid. Using the 12-month/30-day method, what will be Tina and Max's share of the insurance expense and how will it be handled on the settlement statement?
$1,700 ÷ 12 = $141.67
$141.67 ÷ 30 = $4.72
Seller - $141.67 x 7 = $991.69 $4.72 x 23 = $108.56
$991.69 + $108.56 = $1,100.25
Buyer - $1,700 - $1,100.25 = $599.75 will be credited to the seller and debited to the buyer.
182
Seller Paul will get the second quarter water bill at the end of June. The bill is $39.00 per quarter. If closing is on May 7, what will be Paul's share of the bill?
$39 ÷ 91 days = $.43 per day
| $.43 x 54 days (Paul's share of the 91 days) = $23.22
183
At the title closing:
The buyer completes his or her financing.
The seller transfers the title.
Both the buyer and seller pay the necessary charges
The mortgage loan, if any, is closed.
Any existing liens on the property are satisfied.
The buyer pays the purchase price for the property.
Each party pays all the appropriate fees associated.
The seller delivers the title.
The deed is the most important document at closing, since it transfers the property to the purchaser. The purchaser may require a survey to verify the location and size of the property.
184
Recording Acts
Constructive notice, or legal notice, is knowledge of a fact that a person could have or should have obtained.
A person who has received actual notice has actual knowledge of something.
The Torrens System differs from other title recording systems in that title passes only when the conveyance has been duly registered on the title certificate itself.
185
Title Issues
A seller is required to deliver a marketable title at closing - must have evidence of title.
Before agreeing to lend money, the lender will order a title search to be sure there are no liens on the property.
186
Chain of title
Chain of title refers to the succession of property owners of record dating back to the original grant of title from the state to a private party. To remove a clouded title, an owner may need to initiate a suit to quiet title.
187
abstract of title
An abstract of title is a written, chronological summary of the property's title records and other public records affecting rights and interests in the property.
188
Title Insurance
Combines the abstracting process with an insurance program. The policy holder is protected against losses that arise from "hidden" defects.
The title insurance company:
Examines all records pertaining to the property's recorded history.
Reviews risks that might not appear in the public record.
Interprets the legality of the records.
Helps the property owner correct any defects.
Insures the property against economic loss.
Both the buyer and the lender should have title insurance
189
Real Estate Settlement Procedures Act
RESPA requires that the parties to certain transactions receive the correct figures pertaining to their closing costs. It applies to purchases of residential property; involving first or second mortgages; financed by a federally-related loan.
RESPA specifically prohibits any payment or receiving of fees or kickbacks when a service has not been rendered.
190
TRID (TILA-RESPA Integrated Disclosure) Rule provides specific requirements for lenders:
Lenders must give a copy of the booklet, “Your home loan toolkit” to every person at the time of application for a loan.
Lenders must provide a Loan Estimateof settlement costs at the time of loan application or within three business days of application.
191
Closing Statement
A Closing Disclosure must be delivered to the borrower at least three days before closing.
The closing statement is a detailed accounting of the transaction that is prepared before closing by the closing agent.
A debit is money that the buyer or seller needs to payat closing.
A credit is money that the buyer or seller receives at closing.
The escrow agent will subtract the total of the buyer's credits from the total debits and the result will be what the buyer needs to bring to closing.
The real estate transfer tax is a tax imposed on any deed or instrument which conveys interest in real property in New York State.
Sellers who sell residential property in New York City will have to pay an additional tax - New York City Real Property Transfer Tax (RPTT).
Forms
The Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax (Form TP 584) is used to transmit the transfer tax.
Real Property Transfer Report
FIRPTA Certificate - requires a buyer to withhold estimated taxes equal to 10% of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen).
192
Disclosures After Settlement
Loan servicers must provide borrowers with an annual escrow statement which summarizes all inflows and outflows in the prior 12-month period.
193
Proration
Some expenses paid at closing must be prorated: Real estate taxes, Insurance, Fuel, Water and sewer charges, Rent or Security deposits.
Any item that is prorated is shown on the settlement statement as a debit to one party and a credit to the other party for the same amount.
194
Prepaid Expenses
Prepaid Expenses - Some items are those that were paid for in advance; the buyer will receive a debit and the seller will receive a credit.
195
Accrued Expenses
Accrued Expenses - Other items are those expenses that the seller incurred but have not yet been billed for at the time of closing - paid in arrears; the buyer will get a credit and the seller will get a debit.
Seller expenses usually include transfer taxes, broker commission, attorney fees, etc.
Buyer expenses usually include appraisal and credit report fees, inspections, mortgage recording fees, title insurance, attorney fees, etc.
196
The Closing Disclosure
The Closing Disclosure is required by TRID for all federally-related mortgage loans. This form is also used for cash transactions by many settlement to show how the closing costs were calculated.
197
List three covenants that are essential in a New York lease. (See screen 7 for other correct answers.)
Demising clause
Description of the premises
Clear statement of term
198
In rent controlled properties, under what circumstances could the landlord raise the rent?
The landlord could raise the rent for any of these reasons:
He or she installs a major capital improvement.
He or she increases services.
There is a case of hardship.
Labor and fuel costs have increased.
199
Where must a property owner keep security deposits and how must they be handled?
The security deposits must be kept in an interest-bearing account in a New York State bank. The owner must notify the tenant of the name and address of the bank and pay the tenant the full annual interest, less 1% of the security deposit per year for the owner's administrative costs.
200
What is the difference between a sublease and an assignment?
A sublease is the transfer by a tenant of a portion of the leasehold interest to another party.
An assignment of the lease is a transfer of the entire leasehold interest by a tenant to a third party.
201
List three commons causes of a lease termination. (See screen 17 for other correct answers.)
Term expiration
Voluntary agreement
Property destruction
202
Define a gross lease.
The tenant pays a fixed rent and the owner pays the taxes, insurance and other normal ownership expenses.
203
There are four basic types of leasehold estates:
Estate for Years
Estate from Period to Period (Periodic estate)
Estate at Will
Estate at Sufferance
204
The covenants (agreements or promises) in the lease are very important. The following eight covenants are essential in a New York lease:
```
Capacity to contract
Demising clause
Description of the premises
Clear statement of term
Specification of rent and how it is to be paid
In writing
Signatures
Delivery
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205
Security deposits
must be kept by the owner in an interest-bearing account in a New York State bank. The owner must notify the tenant of the name and address of the bank and pay the tenant the full annual interest, less 1% of the security deposit per year for the owner's administrative costs.
206
A lease may terminate for any of the following causes:
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Term expiration
Notice
Voluntary agreement
Property destruction
Condemnation
Foreclosure
Breach of contract
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207
graduated lease
the rent payments start at a fixed amount but increase as the lease term matures.
208
percentage lease
is a lease whose rental is based on a percentage of the monthly or annual gross sales made on the site.
209
proprietary lease
conveys a leasehold interest to an owner of a cooperative.
210
index lease
provides for the adjustment of rent according to changes in a price index.
