CA_Principles_04[1]

CA_Principles_04[1] - Principles of California Real Estate...

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1 Lesson 4: Encumbrances Principles of California Real Estate Encumbrances » Encumbrance : A nonpossessory interest in real property, held by someone other than the owner. Does not give ownership or right to exclusive possession. » Encumbrances are either: financial (liens) or non-financial (easements, private restrictions, etc.) Financial vs. Non-financial Encumbrances
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2 Financial Encumbrances Liens » Financial encumbrances are more commonly called liens . » Security interest : A creditor’s interest in property based on a lien, which makes the property security (collateral) for the owner’s debt. Liens Security interest » If property owner fails to repay debt, secured creditor may foreclose. » Property burdened by lien may be sold, but new owner takes title subject to lien. Liens Voluntary vs. involuntary » Voluntary lien : Property owner voluntarily grants lien to creditor. Examples: mortgage, deed of trust » Involuntary (statutory) lien : Lien given to creditor by operation of law, without property owner’s consent. Example: tax lien
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3 Liens General vs. specific » General lien : Lien attaches to all of the debtor’s real property. Example: judgment lien » Specific lien : Lien only attaches to a specific property, not everything debtor owns. Example: mortgage Types of Liens » Mortgages » Deeds of trust » Mechanic’s liens » Judgment liens » Attachment liens » Tax liens » Special assessment liens Types of Liens Mortgages » Mortgage : A specific, voluntary lien created by contract between a property owner and a lender. Owner (borrower) = Mortgagor Lender = Mortgagee » Borrower gives lender mortgage as security for repayment of loan, with property serving as collateral.
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4 Types of Liens Deeds of trust » Deed of trust: Serves same purpose as mortgage but has different foreclosure procedures. (Also called a trust deed.) Borrower = Trustor or Grantor Lender = Beneficiary Neutral third party = Trustee (Trustee handles foreclosure, if necessary.) Types of Liens Mechanic’s liens » Mechanic’s lien : A specific, involuntary lien attaching to real property on which construction work was performed. Can be claimed by anyone providing labor, materials, or services. If owner fails to pay as agreed, lienholder can foreclose on property. Also called a construction lien or materialman’s lien . Mechanic’s Liens Preliminary notice » Must give owner preliminary notice of right to claim lien within 20 days of starting to provide services or materials. Notice unnecessary if lien claimant has direct contract with owner (usually true for general contractor).
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5 Mechanic’s Liens Deadlines » Deadlines for filing liens vary depending on whether owner files: Notice of completion- must file this within 10 days after project completed, or: Notice of cessation - can file this only after all work has stopped for 30 continuous days (whether project finished or not). Mechanic’s Liens
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CA_Principles_04[1] - Principles of California Real Estate...

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