[PDF] - Why? 2 Liens, Specific and General Legal Terms [lis pendens, PDF Document

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Unit 3 Liens, easements & taxation

h my!

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Why?

Liens, Specific and General
Legal Terms [lis pendens, writ of

attachment]

Restrictive Covenants
Easements: Creation and Termination
Encroachments
Property Taxation & Assessments

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Encumbrances on Real Property

An encumbrance is a claim against a property by a party that is not the owner. Can be financial or non-financial

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All liens are encumbrances, but not all encumbrances are liens.

Liens

A nonpossessory charge against property that provides security for a debt or an obligation of the property, ie….

May be voluntary or involuntary

Pur Race System

Lien Types

Both ad valorem and special assessment liens are valid for 10 years & have priority over other types of liens Liens Specific

Voluntary Mortgage

Involuntary Property Taxes Special Assessments Mechanics Liens

General

Involuntary IRS Taxes Judgements page 52

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Mechanics Lien

Must have contract (expressed or implied)
File within 120 days after last furnishing

labor or materials

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Contractor of labor or goods
Owner/General Contractor doesn’t pay

Mechanic’s Lien

Jan 28 May 14 Sep 11 Effective Date Finished! File Lien

120 Days

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Must bring action to enforce within 180 days of last furnishing of labor or materials

Foreclose Nov 10

Commercial only
Written agency agreement
After broker fully performs duties but before closing
Leases – Broker has 90 days after tenant possesses to file
Must be satisfied within 18 months; inferior to

mechanic’s NC Commercial Real Estate Broker Lien of 2011

Protects real estate broker’s commission

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Judgement – Court ordered; court decides how much money debtor owes creditor (Money Judgement) Involuntary General Lien – When judgement is docketed in county

Current & future real estate & personal property
Effective in other counties if docketed in county judgment book
Good for 10 years from judgment date

General Liens

Against Debtor’s Real & Personal Property

Personal Property Tax Lien – Unpaid becomes general

involuntary lien (ie. car, tags, etc.)

State Tax Lien – Inheritance tax & unpaid state

income tax

Federal Tax Lien – Failure to pay any portion of

federal IRS taxes (withholding)

General Liens Continued

Effects of Liens

Liens attach to property,

not owner

Can reduce value of property
Purchaser subject to liens

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Effects of Liens Cont’d

If liens are not paid off at closing, creditors could take court action to enforce payment, new owner could lose property “Pure Race System” – 1st recorded = 1st paid Exception: Mechanics lien jumps to when labor began or materials delivered Priority of Liens

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Property Tax & Special Assessments Always Superior Liens Deed Restrictions

Private agreements that affect the use of land; AKA Covenants, Conditions and Restrictions

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Lis Pendens

Litigation Pending Not a Lien, but a notice Interest acquired while litigation is pending may be subject to any judgement the court may order Writ of Attachment Hold on debtors unsecured property (assets) Writ of Execution Court orders county sheriff to sell property

Easement – a nonpossessory right to use

the land of another for a particular purpose

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Easement Appurtenant

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Attaches to both parcels
In NC, must be recorded
Dominant Tenement – benefits

Servient Tenement – serves Party Drive/Wall

Easement rights straddles the property line of adjacent properties.

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Personal Easement in Gross Benefits a person and terminates on the death of the individual or dissolution of the corporation (irrevocable) Commercial Easement in Gross

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Benefits an entity, not a

property

It must be recorded
NC views as personal right
Irrevocable during easement
wner’s life
Terminates on death of the

easement owner 3 Ways to Make an Easement

Always involves 2 separate parties

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Express Grant (written or spoken) Implication – surrounding circumstances Operation of Law – Existing law dictates a right be given to another party

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Necessity vs. Prescription Necessity

To cure landlocked

land Prescription (Adverse)

Open, Continuous,

Exclusive, without Approval, Notorious

OCEAN

Terminating an Easement

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The purpose no longer exists
The easement holder becomes owner of other

lot (a.k.a. merger)

Release of the right of easement to the owner
f servient tenement

Terminating an Easement Cond

Abandonment – intention is determining factor
Non-Use of prescriptive easement

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Licenses

A personal, non-transferable privilege for a specific use Differs from easements

Usually verbally or informally
Can be terminated or revoked
Not an encumbrance
Automatically ends with either party or sale of

land

Encroachments

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Improvement that illegally extends beyond
wner’s land onto adjoining owner
Discovered by physical inspection or location

survey can show all improvements Recommend a Survey Encroachments Cont’d

Remedied by either

recovering damages or removing encroachment

Could potentially make both

titles unmarketable Always Recommend a survey!

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Property Taxation aka Ad Valorem Tax

Except: Previously recorded state income tax lien

State & local governments have right to impose tax liens on real estate in

rder to support its functions

Property taxes are superior liens & most likely will be paid first out of court

rdered sale (most states)

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Exemption Examples

Machinery Act – Regulates standards, property appraisals & tax exemptions and says NC properties will be taxed at 100% of market value – affects all properties unless exempted by statute

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Handicapped

and Elderly

Some energy

efficient HVAC systems

Agriculture
Horticulture
Forest

Lands

Non-profit
Education
Charitable

Groups

Appraisal – Process or opinion of individual property’s value
Assessment – Mass appraisal of all lands in a given area
Official valuation for tax purposes
NC uses mass appraisals & horizontal adjustments

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2 Tax Categories

General Real Estate Ad Valorem Special Assessments, Improvement Special Assessments

Levied for improvements made to specific real

estate (ie. Entire neighborhood – sewer vs. septic)

Value increased so tax repays taxing entity

(county or city can levy)

Can be prorated
Special assessments transfer with the property

Special Assessments Cont’d

Inferior to property taxes, state, local & federal

taxes

Superior to mortgage liens
Not deductible from taxes

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Each taxing body is calculated separately

Ie. Local, city, state

Total Dollars Needed Tax Rate Total Assessments of all Real Estate In Jurisdiction Tax Time Table for NC

page 64 Jul 1 New Rate is Set Aug Tax Bills Mailed Sep 1 Tax Due & Payable Dec 31 End of Tax Year Jan 31 All Taxable Property is Listed Jan 1 Tax Lien Filed Jan 5 Last Year’s Taxes Must be Paid Without a fine

What Does Property Taxation Look Like Expressed in Mils (1/1000 of a dollar

r $0.001)

$32 / $1,000 = .032 $3.20 / $100 = 3.2%

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T-Bar (Circle Math)

Part

X

Whole Rate

T-Bar (Circle Math)

Annual Taxes

X

Assessed Value Tax Rate

What is the assessed value of a house located in the city of Concord if the tax rate is $0.23 per $100 and Cabarrus county rate is $0.74 per $100 and the owner’s taxes are $2,328

X

?

.23 + .74 = .97 per $100

=.0097 or .97% $2,328 40 41 42

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What is the assessed value of a house located in the city of Concord if the tax rate is $0.23 per $100 and Cabarrus county is $0.74 per $100 and the owner’s taxes are $2328

X

$240,000 .23 + .74 = .97 per $100

=.0097 or .97% $2,328

What is the annual tax for a home in Mecklenburg county that has an assessed value

f $375,000 and a tax rate of $0.0725 per

$100

X

$375,000 0.0725 per $100

=.00725 or .0725% ?

What is the annual tax for a home in Mecklenburg county has an assessed value of $375,000 and a tax rate of $0.0725 per $100

X

$375,000 0.0725 per $100

=.00725 or .0725% $2,718.75 43 44 45

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A home in Rowan county has an assessed value of $180,000 and is taxed at $0.65 per $100. The tax rate for China Grove is $0.54 per $100.00. What is the annual tax bill?

X

$180,000 0.0065 per $100

=.0065 or .65% $1,170

MATH FUN!

$160,000 Assessment a.k.a. 30 mils Tax Due

3% $4,800

Annual Taxes Assessed Value Tax Rate Tax Rate Assessed Value Annual Taxes Tax Rate Annual Taxes Assessed Value

Proration of Taxes

Sellers owns the day of closing

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Assume there are 30 days in every month

If you’re selling a house and the closing is scheduled for March 15 How many days will the seller owe?

Tax Timetable for NC

page 64 Jul 1 New Rate is Set Aug Tax Bills Mailed Sep 1 Tax Due & Payable Dec 31 End of Tax Year Jan 31 All Taxable Property is Listed Jan 1 Tax Lien Filed Jan 5 Last Year’s Taxes Must be Paid Without a fine

75 days Seller owes to buyer for the current year’s taxes Jan 30 days Feb 30 days Mar 15 days

Closing of March 15

*People usually pay their taxes by December 31. New taxes are not billed until September 1

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If a closing is scheduled for October 20th

And the seller has paid the taxes for the year?

Who Owes What?

Oct 10 days Nov 30 days Dec 30 days The Buyer owes the Seller 70 days

If the seller had not paid the taxes: Closing is still October 20th

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Seller would pay 285 days & Buyer pays 75 days at closing

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