Flashcards in Unit 13 - part 1 Deck (14):
A lien is a charge or claim against a person's property made to enforce the payment of money.
If a lien is not paid in the allotted time, the lienholder may foreclose on the lien, potentially forcing the sale of the property as set out by state law.
When the lender's security is in the form of real estate, the security interest is called a mortgage lien.
An encumbrance is any charge or claim that attaches to real property and lessens its value or impairs its use.
All liens are encumbrances but not all encumbrances are liens.
- easement don't prevent transfer of title
- liens does
Types of Liens
There are many different types of liens.
One way that liens are classified is by how they are created:
- A voluntary lien
- An involuntary lien:
1. A statutory lien
2. An equitable lien
Liens may be classified according to the type of property involved:
- General liens
- Specific liens
- Vendor's lien
Take on willingly to purchase real estate.
Placed on property without consent to secure a debt (taxes, judgements, mechanics liens)
Placed on property by statue., such as tax liens
Placed by court on a property to keep a lien holder from foreclosing and being unfairly enriched. (IRS)
General liens affect all the property, both real and personal, of a debtor.
Creditor's right to have debtor's property sold to satisfy a debt.
Specific liens are secured by specific property and affect only that particular property.
- on a specific identified piece of land or property
A vendor's lien is the right of a seller to repossess the property sold until the buyer makes all payments for the full purchase price.
Effect of Lien on Title
The existence of a lien does not necessarily prevent a property owner from transferring title to someone else.
The lien might reduce the value of the real estate. Because the lien attaches to the property, not the property owner, a new owner might lose the property if the creditors take court action to enforce payment. Once in place, a lien runs with the landand will bind all successive owners until the lien is paid.
- liens have to be paid off and released
- title company won't transfer a property with unreleased liens
Priority of liens
In general, the rule for priority of liens is first to record, first in right (priority).
The priority of payment typically is established by the date the liens are placed in the public record.
There are some notable exceptions to this rule. Real estate taxes and special assessments generally take priority over all other liens, regardless of the order in which the liens are recorded.