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8/19/2019 Unit 3 Liens, easements & taxation oh my! page 51 1 Why? 2 Liens, Specific and General Legal Terms [lis pendens, writ of attachment] Restrictive Covenants Easements: Creation and Termination

  1. 8/19/2019 Unit 3 Liens, easements & taxation oh my! page 51 1 Why? 2 Liens, Specific and General • Legal Terms [lis pendens, writ of • attachment] Restrictive Covenants • Easements: Creation and Termination • Encroachments • Property Taxation & Assessments • 3 1

  2. 8/19/2019 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 All liens are encumbrances, but not all encumbrances are liens. page 51 4 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 5 Lien Types Liens Specific General Involuntary Involuntary Voluntary Property Taxes IRS Taxes Mortgage Special Assessments Judgements Mechanics Liens Both ad valorem and special assessment liens are valid for 10 years & have priority over other types of liens page 52 6 2

  3. 8/19/2019 Mechanics Lien • Contractor of labor or goods • Owner/General Contractor doesn’t pay • Must have contract (expressed or implied) • File within 120 days after last furnishing labor or materials page 52 7 Mechanic’s Lien page 52 Effective Foreclose Finished! File Lien Date Nov 10 Jan May Sep 120 Days 11 28 14 Must bring action to enforce within 180 days of last furnishing of labor or materials 8 NC Commercial Real Estate Broker Lien of 2011 Protects real estate broker’s commission • 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 9 3

  4. 8/19/2019 General Liens Against Debtor’s Real & Personal Property 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 • 10 General Liens Continued 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) 11 Effects of Liens • Liens attach to property, not owner • Can reduce value of property • Purchaser subject to liens 12 4

  5. 8/19/2019 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 13 Priority of Liens Always Property Tax & Special Assessments Superior Liens “Pure Race System” – 1 st recorded = 1 st paid Exception: Mechanics lien jumps to when labor began or materials delivered page 55 14 Deed Restrictions Private agreements that affect the use of land; AKA Covenants, Conditions and Restrictions page 55 15 5

  6. 8/19/2019 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 page 55 16 Writ of Attachment Hold on debtors unsecured property (assets) Writ of Execution Court orders county sheriff to sell property 17 • Easement – a nonpossessory right to use the land of another for a particular purpose 18 6

  7. 8/19/2019 Easement Appurtenant  Attaches to both parcels  In NC, must be recorded  Dominant Tenement – benefits Servient Tenement – serves page 56 19 20 Party Drive/Wall Easement rights straddles the property line of adjacent properties. 21 7

  8. 8/19/2019 Personal Easement in Gross Benefits a person and terminates on the death of the individual or dissolution of the corporation (irrevocable) 22 Commercial Easement in Gross  Benefits an entity, not a property  It must be recorded  NC views as personal right  Irrevocable during easement owner’s life  Terminates on death of the easement owner page 57 23 3 Ways to Make an Easement Always involves 2 separate parties Express Grant (written or spoken) Implication – surrounding circumstances Operation of Law – Existing law dictates a right be given to another party page 57 24 8

  9. 8/19/2019 Necessity vs. Prescription Prescription (Adverse) Necessity • Open, Continuous, • To cure landlocked Exclusive, without land Approval, Notorious OCEAN 25 Terminating an Easement • 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 of servient tenement page 58 26 Terminating an Easement Cond • Abandonment – intention is determining factor • Non-Use of prescriptive easement 27 9

  10. 8/19/2019 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 28 Encroachments • Improvement that illegally extends beyond owner’s land onto adjoining owner • Discovered by physical inspection or location survey can show all improvements Recommend a Survey page 57 29 Encroachments Cont’d Remedied by either • recovering damages or removing encroachment Could potentially make both • titles unmarketable Always Recommend a survey! 30 10

  11. 8/19/2019 Property Taxation aka Ad Valorem Tax State & local governments have right to impose tax liens on real estate in order to support its functions Property taxes are superior liens & most likely will be paid first out of court ordered sale (most states) Except: Previously recorded state income tax lien Page 59 31 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 Exemption Examples • Non-profit • Handicapped • Agriculture and Elderly • Education • Horticulture • Some energy • Charitable • Forest efficient HVAC Groups Lands systems page 60 32 • 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 33 11

  12. 8/19/2019 2 Tax Categories General Real Estate Special Assessments, Ad Valorem Improvement 34 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 35 Special Assessments Cont’d • Special assessments transfer with the property • Inferior to property taxes, state, local & federal taxes • Superior to mortgage liens • Not deductible from taxes 36 12

  13. 8/19/2019 Each taxing body is calculated separately Ie. Local, city, state Total Total Assessments of Tax Dollars all Rate Needed Real Estate In Jurisdiction 37 Tax Time Table for NC Jan 1 Jan 31 Aug Sep 1 Dec 31 Jan 5 Jul 1 Tax Lien Last Year’s Taxes All Taxable New Rate Tax Bills Tax Due & End of Filed Must be Paid Property is Listed is Set Mailed Payable Tax Year Without a fine page 64 38 What Does Property Taxation Look Like Expressed in Mils (1/1000 of a dollar or $0.001) $32 / $1,000 = .032 $3.20 / $100 = 3.2% 39 13

  14. 8/19/2019 T-Bar (Circle Math) Part Whole Rate X 40 T-Bar (Circle Math) Annual Taxes Assessed Tax X Value Rate 41 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 $2,328 ? .23 + .74 = .97 per $100 X = .0097 or .97% 42 14

  15. 8/19/2019 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 $2,328 .23 + .74 = .97 per $100 $240,000 X = .0097 or .97% 43 What is the annual tax for a home in Mecklenburg county that has an assessed value of $375,000 and a tax rate of $0.0725 per $100 ? 0.0725 per $100 $375,000 X = .00725 or .0725% 44 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 $2,718.75 0.0725 per $100 $375,000 X = .00725 or .0725% 45 15

  16. 8/19/2019 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? $1,170 0.0065 per $100 $180,000 X = .0065 or .65% 46 MATH FUN! 3% $4,800 $160,000 Tax Due a.k.a. 30 mils Assessment Annual Taxes Assessed Value Tax Rate Tax Assessed Annual Tax Annual Assessed Rate Value Taxes Rate Taxes Value 47 Proration of Taxes Sellers owns the day of closing Sellers owns the day of closing Sellers owns the day of closing Sellers owns the day of closing 48 16

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