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What Is A Lien | Real Estate Exam Prep - YouTube
Channel: The Real Estate Classroom
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hey everybody my name is paul vachesky
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and welcome to the real estate classroom
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youtube channel well in today's video
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we're going to talk about the basics of
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liens you have to know something about
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liens because they are really prevalent
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in the real estate
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profession and actually you have to know
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them for your real estate licensing exam
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so let's talk about liens in this video
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[Music]
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all right so before we get started we
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have to know what a lien is
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so we can understand uh specific liens
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and how they work and the processes and
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whatnot so the definition of a lien is
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a lien represents a legal monetary claim
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held against
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or placed against a property personal
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property or real property
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which provides a lien holder security
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for a debt obligation or
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judgment so if you owe somebody money
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they can come after you
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to satisfy that debt by placing liens on
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your personal property like a car
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or your real property uh two things you
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have to know liens are generally
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enforced by a court order when the
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creditor
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actually files uh legal action
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and then number two court a court can
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order
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the forced sale of a piece of property
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to satisfy that debt and we're going to
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talk more about that
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in this video now liens fall in two
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categories
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they are a voluntary lien or involuntary
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lien
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and and we're going to discuss in detail
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both a voluntary lien is also known as
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and you have to know this for your real
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estate
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exam a voluntary lien can also be called
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an equity lien an involuntary lien can
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also be called a statutory lien now a
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voluntary lien is where
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there is consent given to
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place the lien against the property for
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example
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a data trust or a mortgage so when you
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go down to the bank to borrow the money
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the bank's going to say listen
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i'll give you the money so you can buy
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this piece of property but in return
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you're going to voluntarily agree
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to allow us to place a lien against the
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property in case you default on your pay
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your payment that is a voluntary lien an
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involuntary lien or sometimes called a
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statutory lien
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is created by statute or operational law
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and it's
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done without the property owner's
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consent
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that's why it's involuntary a couple of
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key terms you have to know
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the debtor is known as the leanee
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and the lien holder is known as the lien
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or
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all right so if you borrow money from
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the bank you're the debtor
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so you're legally known as the leaney
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and the bank is the
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lien or because they're the ones who
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hold the lien against the piece of
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property
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examples of involuntary or statutory
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liens
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are special assessments property taxes
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child support in some state including
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nebraska
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and some others and we're going to talk
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about each one in detail
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liens can be specific or general so we
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can have a specific
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voluntary lien or we can have a specific
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involuntary lien we can have a general
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specific lien or a general involuntary
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lien
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now the thing you need to know about
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specific liens and that's what we're
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talking about first
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they only affect a singular
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specific piece of property all right
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so a lien is placed only against a piece
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of property
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these liens can typically force the sale
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to satisfy a debt
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so for example we talked about that
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mortgage or that deed of trust
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when you borrow money from the bank if
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you don't make the payment then the bank
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can
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force the sale of that property to pay
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off that loan
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property taxes are specific so obviously
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real estate taxes have to be paid and if
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you don't pay them
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then the property tax is specific to
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that piece of property
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so there's going to be a lien placed
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against that piece of property special
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assessments
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mechanics liens and attachments and i'm
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going to talk more about each one in the
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next slide but
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thing to know they can be voluntary or
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involuntary
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they only affect a specific piece of
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property and
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there can be a forced sale to satisfy
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a debt so let's talk about each one of
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the type of specific liens that you need
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to know for your exam number one is a
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mortgage we already talked about that
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number two property taxes
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how it works you don't have to really
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know this for an exam but i do want to
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do this for illustrative purposes
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in nebraska for example you have to pay
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taxes twice a year so if you don't make
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your
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property tax march the first monday of
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every march the county is going to sell
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what's called a tax lien certificate
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an investor is going to buy that tax
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lien certificate and there's a 14
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penalty interest after a three year
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period if you do not
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redeem or pay off that tax lien
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certificate including the principal and
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the penalty
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interest then that lien holder can
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foreclose on the property essentially
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and you lose ownership to it so it is an
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involuntary lien meaning you're not
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consenting to it
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it's automatically placed against the
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property special assessments that's an
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involuntary lien
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now special assessments are used to pay
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for things
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like improvements such as sidewalks
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streets utilities
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street lights those type of things and
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if you recall the past year there's been
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some debate here in
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omaha about because we have
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residents that live within the city
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limits of omaha
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but yet they still have dirt and gravel
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roads and
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the city says that the owners have to
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pay for that so what happens is the city
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is going to come
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in they're going to pave or put the
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street in they're going to put concrete
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in
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and then they're going to have a special
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assessment levied against each one of
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the residents or each one of the
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properties
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that that are on that street and if they
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don't pay that that special assessment
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as a property owner
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then the city can come in and actually
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foreclose on the property to pay that
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debt
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number four mechanics liens that is an
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involuntary lien
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so if you hire a contractor to do work
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and that contractor buys
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materials and does the work so there's
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labor cost
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and then you don't pay them they file a
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mechanics lien against
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that property number five
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attachment liens now attachment liens
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are not very common
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in residential side of things but they
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are actually common in the commercial
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specifically the retail industry so what
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it is it's a lien against
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placed against personal property and
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then remember another name for personal
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property is
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chattel and it prevents the owner from
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leaving the state
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with the merchandise and what happens is
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the sheriff
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upon receiving the court order will
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actually go and seize
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all of that merchandise it'll be sold
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off
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and then liquid liquidated into into
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cash to pay for that debt
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so if you have a retail establishment
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and you have huge inventory
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of clothing for example that you
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purchased well that's a debt that's owed
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if you go out of business that creditor
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that person that financed or gave you
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the
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all the clothing is going to get a court
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order
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they're going to have the sheriff go out
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and confiscate all of that
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merchandise all that clothing and then
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they're going to sell that
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to um satisfy that debt that is called
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an attachment lien
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and an attachment lien here is it only
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attaches to personal property
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all right let's talk about general liens
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remember liens are specific or general
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and they can be voluntary or involuntary
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as well
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and it affects all personal property in
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all real properties so it's not
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like a specific lien that's specifically
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to a
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singular property this is uh
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relevant to all personal and real
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property as well
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and these liens like specific liens can
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force the sale
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to satisfy debts and some examples are
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federal income tax
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judgment liens federal and state estate
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tax
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inheritance tax decedents death that's
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somebody that dies and they leave debts
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behind
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child support and corporation franchi
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franchise tax and i do want to talk
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about each one of these specifically
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now general liens here are some types
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federal income tax this is a
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involuntary lien this is if you don't
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pay your federal income tax
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then the irs places liens not only on
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your personal property such as
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vehicles but also
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your real property and these liens are
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valid
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for 10 years so every 10 years the irs
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has to refile those
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liens number two judgment liens this is
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an
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involuntary lien give you an example
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for those of you old enough to remember
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the o.j o.j
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simpson murder trial he was accused of
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murdering his ex-wife
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he won the criminal case so he was not
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convicted
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but the victims families there was two
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people that
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he allegedly killed they filed a
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wrongful death suit in civil court which
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is different than criminal court
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and they won they won what's called a
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wrongful death suit
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and i think if i remember correctly the
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judgment was like 30 million dollars or
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whatever
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so the two families that that won the
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judgment they went out and placed liens
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against everything that he owned
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personal and
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real including his heisman trophy
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and much of that was collected and sold
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off to
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pay for that judgment now one thing you
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have to know about a judgment lien is
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specific liens have higher priority
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over judgment liens and we learned in a
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previous video
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that liens are priority liens or the
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priority of the lien is based on first
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come first filed
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so whoever filed first is senior then
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second then third
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well what happens with a judgment lien
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is even if that
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lien is in first place a specific lien
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will automatically
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jump above it a tax lien for example is
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going to jump above a judgment lien
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an irs lien is going to jump above it
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it has a higher priority even if the
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judgment lien was
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filed first federal estate tax this is
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an involuntary
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lien this is where a federal taxes
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levied against a death person
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a dead person's estate upon the transfer
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of property to the devisee
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so from a previous video we discussed
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how this works so
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uh the devise is the
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property that's being willed the divisee
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is the person receiving
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that willed property so upon the
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transfer
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of title of that property to the divisee
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then federal estate tax has to be
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paid and then the estate will have to
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file
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an estate income tax return number four
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state inheritance tax it's a lien that's
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automatically placed
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against the inherited property until
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those taxes are paid
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number five if a decedent's debts
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are so if somebody dies and they have
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assets and they have debts
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well the debtor or i'm sorry the
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creditor can place
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liens against the estate the property of
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the estate to ensure that they try to
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get some of their money back credit card
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companies do this typically if they know
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that the the decedent
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has substantial assets child support
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that's an involuntary lien in nebraska
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it's automatic it'll be placed against
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your personal
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i'm sorry your your real property um
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number seven corporation franchise tax
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this actually is a very old
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tax law but the tax is based upon an
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income that you get from a franchise or
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a capital stock that's issued by the
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corporation
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that's really all you need to know about
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that
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two other liens i need you to know about
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vendors lean and a vendees lien now
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i talked about in a previous video land
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contracts and what they are and how they
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work
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so you won't understand this principle
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totally until you go back and watch that
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video
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but a land contract is where the owner
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sells
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a piece of property to somebody and it's
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financed through a land contract
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the vendor is the owner the vendee is
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the person buying the property and
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receiving what's called
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equitable title the vendor the owner
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retains legal title and then the vendee
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retain or gets the equitable title
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now these liens the vendors liens and
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the vendees liens are there to protect
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both their interests so on a vendor's
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lien
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if the vendee who is the buyer if they
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default on their payments and they stop
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making their payments it's a way for the
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vendor to go in
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and get their property back the one
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thing you have to know
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uh the vendee if they are
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foreclosed upon they will lose all their
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down payment
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all their equity everything that they've
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paid up to that point
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it all goes to the owner or the vendor
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on the other hand if the vendi complies
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and they fulfill the terms of that land
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contract they pay everything off
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and the owner or the vendor refuses or
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fails to
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transfer a d transferring legal title
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then it's a way for the vendee to go in
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and enforce their interest
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and and uh it's a way to protect their
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interest
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municipal liens this is interesting it's
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becoming more and more pro
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prominent utilities electrical
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water sewer gas those type of liens are
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placed against the house
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not the person and and this is a big
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issue in the landlord tenant community
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so um the tenant goes and has the
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electrical paid
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uh hooked up and established on a rental
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property that they're renting
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but they don't make the they don't make
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their electric
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bill payment so an a lien is then placed
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for that amount against the property
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who ends up paying that typically it's
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the owner of the property that's why
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screening for good tenants is so
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essential
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in those jurisdictions the
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municipalities place the lien against
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the property
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not the person surety bail bond lien
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this is if you use
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your house as collateral to bail
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somebody
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out of jail and then the last one is on
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your screen
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less pendants that means lawsuit pending
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uh this happens when here's the mo
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there's a lot of ways this happens but
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what happens is somebody files a lawsuit
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against the property
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and then it prevents the property from
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being sold
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here's what here's what i'll tell you
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what happens most common in the real
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estate world
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buyer seller enter into a contract the
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deal blows apart the
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seller says okay the buyer is not
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performing so we're going to put the
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house back on the market and we're going
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to find another buyer
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the buyer the first buyer says oh
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bullcrap
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we still think we have a valid contract
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seller says no moving on the seller then
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enters into a purchase contract with
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somebody else
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the first buyer says well i'm not going
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to allow that to happen
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so they go into court and they file a
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lawsuit
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against that person
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that lawsuit is going to show up on
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title when a title search is done
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and so what's going to happen
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essentially is if the second
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buyer is is getting financing for the
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property the lender's never ever going
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to loan the property because they can't
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get free clear marketable title
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now theoretically if it's a cash deal
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that second buyer could
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still purchase the property but they're
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going to purchase that property without
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getting free clear marketable title
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we call that uh a cloud
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c-l-o-u-d there's a cloud on title
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so that that second buyer is actually
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going to receive ownership to that
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property
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that is not free and clear of liens and
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encumbrances
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so there's a cloud on the title a lot of
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great stuff we talked about today in
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this video if you're going to continue
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studying check out this video
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right here and if you haven't subscribed
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to the channel please do so click on the
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little circle to my left i would
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appreciate it i'll see you in the next
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video
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