Chapter 5 - Encumbrances and Liens Flashcards
Easements and encroachments are types of
encumberances
A court might grant an easement by prescription if
an intruder has been using an owner’s property for a certain period with the owner’s knowledge but without permission
Types of junior liens
-federal income tax liens
-state corporate income tax liens
-state intangible tax liens
-judgment liens
-mortgage liens
-vendor’s liens
-mechanic’s liens
Types of superior liens
-real estate tax liens
-special assessment liens
-federal estate tax liens
-state inheritance tax liens
A court renders a judgment which authorizes a lien to be placed against the defendant’s house, car, and personal belongings. This is an example of a
general judgment lien
The lienee in a lien is the
owner of the property that is subject to the lien
What kind of interest does a lienor usually have in the lined property?
an equitable interest, except a mortgage lienor in a title-theory state
One difference between a condition and a covenant is that…
a condition can be created only when there is a transfer of ownership
An encroachment is
an unauthorized physical intrusion of one property into another
In a strict foreclosure
a lender takes title to the liened property directly
A property owner who is selling her land wants to control how it is used in the future. She might accomplish her aim by means of
a deed restriction
What is meant by a ‘lien-theory’ state?
a state in which a mortgagor retains title to the property when a mortgage lien is created
A defaulting borrower may avoid foreclosure by giving the mortgagee
a deed in lieu of foreclosure
A brick fence straddles the property line of two neighbors. The neighbors agree not to damage it in any way. This is an example of
a party wall
An encumbrance is most broadly defined as
another’s interest in a real property that limits the interest of the freehold property owner
What is the primary danger of allowing an encroachment?
over time, the encroachment may become an easement by prescription that damages the property’s market value
A property survey reveals that a new driveway extends one foot onto a neighbor’s property. This is an example of
an encroachment
The two general types of encumbrances are
those that affect the property’s use and those that affect legal ownership, value and transfer
Types of restrictions on owner’s use by other’ right to use
easements, encroachments, licenses, and deed restrictions
Types of restrictions on ownership value and transfer
liens, deed conditions
Easement
is an interest in real property that gives the holder the right to use portions of the legal owner’s real property in a defined way
The receiver of the easement right is the _____; the giver of the easement right is the _____.
benefited party; burdened party
Essential characteristics of easements
-one cannot own an easement over one’s own property
-an easement pertains to a specified physical area within the property boundaries
-an easement may be affirmative (allowing use) or negative (prohibiting use)
Two types of easements
appurtenant and gross
Easement appurtenant
gives a property owner the right of usage to portions of an adjoining property owned by another party.
the property enjoying the usage right is called the dominant tenement or dominant estate. the property containing the easement is the servient tenement
The term appurtenant
means ‘attaching to’
Easement appurtenant right and obligations automatically
transfer with the property upon transfer of either the dominant or serviant estate, whether mentioned in the deed or not
Non-exclusive use
the servient tenement as well as the dominant tenement, may use the easement area provided the use does not unreasonably obstruct the dominant use
Easement by necessity
an easement by necessity is an easement appurtenant granted by a court of law to a property owner because of a circumstance of necessity - most commonly the need for access to a property
Party wall easement
a party wall is a common wall shared by two separate structures along a property boundary
Party wall agreements generally
provide for severalty ownership of half of the wall by each owner. the agreement grants a negative easement appurtenant to each owner in the other’s wall.
Other structures that are subject to party agreements are…
fences, driveways, and walkways
Easement in gross
is a personal right that one party grants to another to use the grantor’s real property
Personal easement in gross
is granted for the grantee’s lifetime, and terminates on the grantee’s death
Commercial easement in gross
is granted to a business entity rather than a private party. the right may be assigned, transferred or willed
eg: marina’s right of way to boat ramp
An easement may be created by
voluntary action, by necessary or prescriptive operation of law and by government power of eminent domain
Voluntary easement
a property owner may create a voluntary easement by express grant in a sale contract, or as a reserved right expressed in a deed
Easement by necessity
a court decree creates an easement by necessity to provide access to a landlocked property.
Easement by prescription
is someone uses another’s property as an easement without permission for a statutory period of time and under certain conditions a court order may give the user the easement right by prescription - regardless of the owner’s desires
For a prescriptive easement order to be granted, the following circumstances must be true
-adverse and hostile use - the use has been occurring without permission or license
-open and notorious use - the owner knows or is presumed to have know of the use
-continuous use - the use has been generally uninterrupted over the statutory prescriptive period
Eminent domain
government entities can create easement through the exercise of eminent domain, wherein they condemn a portion of a property and cause it to be sold ‘for the greater good’
Easements terminate by:
-express release of the right by the easement holder
-merger, as when a dominant tenement acquires the servient property
-purposeful abandonment by the dominant property
-condemnation through eminent domain
-change or cessation of the e purpose for the easement
-destruction of an easement structure, such as a party fence
-non-use of an easement by prescription
Encroachment
is the unauthorized, physical intrusion of one owner’s real property into that of another
Examples of encroachments
-a tree limb extending into the neighbor’s property
-a driveway extending beyond the lot line
-a fence built beyond the property line
Encroachments cause
infringements on the rights of the trespassed owner, and may diminish the property’s value
Encroachments often do no appear on ___
a property’s title records.
Licenses
much like a personal easement in gross, is a personal right that a property owner grants to another to use the property for a specific purpose
revocable at anytime
Deed restriction
is a limitation imposed on a buyer’s use of a property by stipulation in the deed of conveyance or recorded subdivision plat
can apply to an individual property or entire subdivision
Deed restrictions typically apply to:
-the land use
-the size and type of structures that may be place on the property
-minimum costs of structures
-engineering, architectural and aesthetic standards
Deed restrictions are either
covenants or conditions
Lien
a creditor’s claim against personal or real property as security for a debt of the property owner
In addition to restricting the owner’s bundle of rights, a recorded lien
effectively reduces the owner’s equity in the property to the extent of the lien amount
The creditor who places a lien on a property is called the ____, and the debtor who owns the property is the ____.
lienor, lienee
Liens have the following legal features:
-a lien does not convey ownership, with one exception (mortgage lien)
-a lien attaches to the property - the new owner acquires the lien securing the payment of the debt
-a property may be subject to multiple liens -the more liens there are recorded against a property, the less secure the collateral is for a creditor
-a lien terminates on payment of the debt and recording of documents - payment of the debt and recording of the appropriate satisfaction documents ordinarily terminate a lien
Lien types
voluntary or involuntary, general or specific, and superior or inferior
A property owner may create a ____ lien to borrow money or some other asset secured by a mortgage.
voluntary
An ____ lien is one that a legal process places against a property regardless of the owner’s desires.
involuntary
If statutory law imposes an involuntary lien, the lien is a ____
statutory lien
If court action imposes an involuntary lien, the lien is an
equitable lien
A general lien
is one placed against any and all real and personal property owned by a particular debtor
A specific lien
attaches to a single item of real or personal property and does not affect other property owned by the debtor
Lien priority
the highest ranking lien is first to receive proceeds from the foreclosed and liquidated security
Two factors primarily determine lien priority:
-the lien’s categorization as superior or junior
-the date of recordation of the lien
Among junior liens, ___ of recording determines priority
date
the rule is: the earlier the recording date of the lien, the higher its priority
The ____ is an exception to the lien priority rule
Mechanic’s lien
Real estate tax lien is also known as
ad valorem tax lien
Judgment lien
attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor
The creditor may obtain a ________ to force the sale of the attached property and collect the debt.
writ of execution
Mortgage and trust deed lien
in lien-theory states, mortgages and trust deeds secure loans made on real proeprty
Vendor’s lien
a vendor’s lien is also called a seller’s lien, secures a purchase money mortgage, a seller’s loan to a buyer to finance the sale pf a property
Municipal utility lien
A municipality may place a utility lien against a resident’s real property for failure to pay utility bills
Mechanic’s lien
a mechanic’s lien secures the costs of labor, materials and supplies incurred in the repair or construction of real property improvements
Foreclosure
all liens can be enforced by the sale or other transfer of title of the secured property, whether by court action operation of law or through the powers granted in the original loan agreement
____ governs the foreclosure process
state law
Three types of foreclosure process enforce mortgage liens:
- judicial foreclosure
- non-judicial foreclosure
- strict foreclosure
Judicial foreclosure
occurs in states that use a two-party mortgage document (borrower and lender) that does not contain a ‘power of sale’ provision
Acceleration and filing
if a borrower has failed to meet loan obligations in spite of proper notice and applicable grace periods, the lender can accelerate the loan or declare that the balance are payable immediately
Lis pendens
gives public notice that the mortgaged property may soon have a judgment issued against it
Writ of execution
authorizes an official such as a sheriff, to seize and sell the foreclosed property
Deficiency judgement
if the sale does not yield sufficient funds to cover the amounts owed, the mortgage may ask the court for a deficiency judgement which allows the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns
Right of redemption
the borrower’s right of redemption, also called equity of redemption, is the right to reclaim a property that has been foreclosed by paying off amount owed to creditors, including interest and costs
Non-judicial foreclosure
when there is a ‘power of sale’ provision in the mortgage or trust deed document, can force the sale of the lined property without a foreclosure suit
There is no ____ in non-judicial foreclosure
redemption period
Strict foreclosure
is a court proceeding that gives the lender title directly, by court order, instead of giving cash proceeds from a public sale
Deed in lieu of foreclosure
a defaulting borrower who faces foreclosure may avoid cour action and costs by voluntarily deeding the property to the mortagee
