Real Estate Law

1
Real Estate Law Liens on Property
2
Liens on Property

• Other Liens
• Lien Priority
• Attachment
• Lis Pendens

• Subjects Covered
• Judgment Liens
• Tax Liens
• Mortgage Liens
• Construction Liens

3
Encumbrances

• Definition
• Charge or burden on property that may diminish
  its value or obstruct use of property, but does
  not necessarily prevent transfer of title.
• Two Types of Encumbrances
• Non-monetary encumbrances -- affect physical
  condition and use of property
• Monetary encumbrances or liens -- affect title

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Encumbrances

• Monetary Encumbrances
• Liens
• Real Estate Taxes
• Mortgages
• Mechanics Liens
• Judgments
• Environmental Super Liens

• Nonmonetary Encumbrances
• Encroachments
• Licenses
• Deed Restrictions/Covenants
• Easements
• Appurtenant
• In Gross
• By Necessity
• By Prescription

5
Liens

• Definition
• The right of creditor to have Debtor's property
  sold and be paid from proceeds. Allows creditor
  to force sale of property.
• Example
• ABC Stereo Comp. sells Tom a 1,000 stereo. Tom
  only has 200, he finances remaining 800 with
  ABC Stereo Comp. Tom fails to make final
  payment. ABC Stereo Comp., which has a lien on
  stereo can repossess and sell to recoup loss.

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Types of Liens

• Voluntary
• Most common is mortgage where owner of property
  agrees to use title to real estate as security
  for a debt.
• Liens also arise by operation of contract.
  (e.g., Contract with electrician to perform work
  on home)
• Involuntary
• By operation of law. (i.e., tax lien, judgment
  liens, Super liens - environmental)

7
Mechanics Liens

• When does owner subject real property to lien?
• Contract states -- lien claimant must show he was
  hired by Owner or his agent to furnish labor or
  materials.
• Consent states -- sufficient for lien claimant to
  show owner had knowledge of and consented to
  doing work, even if work ordered by person other
  than Owner, i.e., Tenant.
• Courts recognize that Landlord is often
  powerless to prevent Tenants from improving,
  therefore need affirmative consent of Landlord.
  (i.e., provision in lease permitting additions.)

8
Mechanics Liens (contd)

• Who is entitled to lien?
• Driven by state statute -- Generally, both
  contractor and subcontractor can recover, anyone
  who furnishes labor or materials to improve real
  estate.
• In some states, the landowner is responsible for
  making sure subcontractor is paid even when
  landowner has paid general contractor in full and
  general contractor has NOT paid subs. Always
  best for landowners to get lien waivers from
  general contractor before making any payment.

9
Mechanics Liens (contd)

• What type of work is covered?
• Mechanics' liens only available for work which
  results in permanent improvements.
• Example
• If contractor installs removable shelving in home
  which could be removed without serious damage to
  home, no lien could attach since shelving did not
  constitute permanent improvement.

10
Mechanics Liens (contd)

• What's the procedure for claiming a lien?
• Every lien claimant MUST record lien statement
  with register of deeds specifying amount due and
  nature of improvement within certain time after
  work completed. This appears on title work.
• Then claimant must commence an action to enforce
  lien within a limited time period after work is
  completed.
• If court decides lien is valid -- property is
  sold to satisfy debt.

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Quiz

• True/False
• A declaratory judgment is an award of monies to a
  plaintiff if he/she wins the lawsuit.
• A judgment award in and of itself is not a lien.
• An order of final judgment must be recorded to
  evidence the satisfaction of a judgment lien.
• Federal tax liens are valid for 20 years from the
  date of the assessment.

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Quiz (contd)

1. A subordination agreement is one in which a party
   agrees that his/her interest in real property
   should have a lower priority than the interest to
   which it is being subordinated.
2. To file a construction lien, there generally is a
   requirement that the lien claimant be in privity
   of contract with the property owner.
3. A lien waiver is a document indicating that a
   subcontractor has been paid and will not be
   subjecting real property to liens.

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13
Quiz (contd)

1. The statute of limitations to bring a foreclosure
   action on a construction lien typically is of
   short duration.
2. A notice of lis pendens is not a lien.
3. The only tax lien that is not a general tax lien
   is a real property tax lien.

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