Chapter 2.5 | Encumbrances Which Create Liens

Front 1

Define the term Encumbrance.

Back 1

External limitations restricting an owner's rights, use of the property, or diminish its value

Front 2

Define the term Lien.

How are liens, outside of Property Tax and Mechanic's Liens, prioritized?

Back 2

In the event of default, a creditor has the right (or claim) to repay the debt by selling a debtor's property to cover the unpaid amount.
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*The priority is set by the date of recording.
*Liens do not increase the value of the property.

Front 3

Explain the difference in Voluntary Liens and Involuntary Liens.

What's another term for a Voluntary Lien? Involuntary Lien?

Back 3

OWNER'S CONSENT
Voluntary - WITH (requires) owner consent
Involuntary - WITHOUT (doesn't require) owner consent
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*Equitable liens arise from common law and are usually voluntary.
*Statutory liens arise from legislative acts and are usually involuntary.

Front 4

What is a Specific Lien?

What is a General Lien?

A decedent's debts would result in a _____ lien against ____ property.

Back 4

Specific - lien attached to only ONE PROPERTY regardless of how many properties one may own
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General - lien attached to *ANY property, *both REAL and PERSONAL, the debtor owns.
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*A decedent's debts would result in a general lien against all property.

Front 5

There are (6) Specific Liens. List them.

Back 5

Specific

Attachment | Mechanic's | Mortgage | Property Tax (*Special Assessment) | Vendee's | Vendor's

Specific - lien attached to only ONE PROPERTY regardless of how many properties one may own

Hint 5

AMM PVV

Front 6

There are (4) General Liens. List them.

Back 6

Involuntary

Decedent's Debts | Estate & Inheritance Tax | Federal & State Income Taxes (*invol/gen) | Judgment

General - lien attached to ANY PROPERTY, both real and personal, the debtor own

Front 7

What is a Property Tax Lien?

What is unique about a Property Tax Lien?

Back 7

Specific

A property tax lien is the tool a tax collector uses to collect a tax obligation from a taxpayer's property.
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*A real property tax lien takes priority over all other liens.

Front 8

What is a Mortgage Lien?

A mortgage is an example of what type of lien? Why?

Back 8

*Voluntary + Specific

*The pledge of property (I pledge to give you my home) as security (IF I don't pay my debt) for repayment.
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*A mortgage is an example of a voluntary specific lien. The lien is said to be specific in that, only the pledged property is encumbered.

Front 9

What is a Mechanic's Lien?

What's another term for Mechanic's Lien?

Back 9

Specific

Allows contractors, subcontractors, workmen and suppliers of building materials to place a lien against a property, if they are not paid in full for improving it (applies to both new construction AND remodeling). *A Mechanic's Lien will expire if necessary action is not taken.
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Materialman's Lien

Front 10

What is a Vendor's Lien?
What's another name for a Vendor's Lien?
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What is a Vendee's Lien?
What's unique about a Vendee's Lien?

Back 10

Specific + Voluntary (both)
- When a seller (vendor) finances part of the purchase price and the purchaser (vendee) pledges the property as security for the debt.
- Also known as a Purchase Money Mortgage.
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- A lien created when the seller defaults under a purchase and sale agreement.
-*The vendee's lien has priority over subsequent recorded liens.
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Vendee X:Mr. Jones entered into a contract with Mr. Smith to purchase Mr. Smith's lake home. After the contract was properly entered, Mr. Smith decided not to sell and obtained a mortgage on the property. Which of the following statements is correct?

Front 11

What is an Attachment Lien?

What's unique about an Attachment Lien?

Back 11

Specific
*An attachment lien grants court custody of a specific property to prevent the owner from transferring ownership while a suit for monetary damages is being decided.
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*Only lien that absolutely prevents a sale or any other conveyance of a property.*

*x:Guy who owns a new car is being sued for monetary damages. Cannot transfer property ownership to someone else under Attachment Lien while a suite for monetary damages is being decided.

Front 12

What is a Judgment Lien?

Back 12

Involuntary

*When a plaintiff (creditor) seeks a monetary award for damages, the plaintiff must enter a lawsuit against the defendant (debtor). If the plaintiff wins the lawsuit, the court will award a judgment and establish the indebtedness

Front 13

List the steps, in order, that must be taken before a creditor can have an outstanding debt satisfied through the sale of the debtor's property.

Back 13

The order of the steps is lis pendens, attachment, judgment and writ of execution

Front 14

What are Federal and State Tax Liens?

Back 14

*Involuntary + General
Any unpaid federal or state income taxes become GENERAL liens against the taxpayer's real or personal property.