Illinois Real Estate Practice Exam

What type of lien is created by the court to ensure payment of a judgment, as well as by agreement?

1. Subordination Agreements

2. Equalization Factor

3. Equitable Lien

4. Assessment

The correct answer is: Equitable Lien

The correct choice is Equitable Lien because this type of lien is established either through a judicial process, such as a court judgment, or through mutual agreements between parties. An equitable lien is not necessarily tied to the ownership of a property, but rather it asserts a right to have a claim against the property to secure an obligation or payment. This type of lien is important in real estate because it ensures that a party who has been wronged or has provided a service or loan can have a form of security against the property in question, preventing the title from being transferred or encumbered without addressing the underlying claim. The legal framework typically involves equitable principles, where the court intervenes to prevent unjust enrichment. The other options, such as subordination agreements and assessment, do not directly relate to the creation of a lien by judgment or agreement. Subordination agreements deal with the priority of liens rather than the establishment of a lien itself, while assessments usually refer to property valuation or taxation processes, not to liens created by courts. Therefore, understanding the nature and implications of equitable liens is crucial in real estate transactions and legal considerations involving property claims.