Encumbrance Flashcards
Encumbrance
Is a charge or legal claim against real estate.
This limitation or liability represents the right or claim to a portion of the property or use of the property by someone other than the property owner.
*An encumbrance can restrict the owner’s right of disposition for the property or lessen its value.
In general, an encumbrance is used to allow one person to use the property of another to gain access to their property.
- Cities and states use encumbrances to allow access to public utilities for repair and maintenance.
- Private encumbrances many be used to SHARE property by two adjoining property owners, such as a drive or fence.
Types of Encumbrances (2)
- Money
2. Non-money
Money Encumbrance
Also called a lien, can be placed on a property in the form of a claim, which is collateral held for a debt, such as a tax lien, mechanics lien or mortgage.
Non-Money Encumbrance
Relates to how a property CAN BE USED, controlled or accessed by someone other than the property owner.
Private Non-money Encumbrances or Restrictions encompasses the following.
- Deed or Builder Restrictions
- Covenants, Conditions, and Restrictions (CCRs)
- Homeowners Association (HOAs)
Liens
A future ownership interest in a property secured by a debt against a piece of real property used as collateral.
It is not an Actual Ownership.
For example, Mortgage is the most common lien placed on a real property.
Typically a public record. Generally filed in the county where the property is located with the county records office, sometimes called the recorder’s office.
If debt is unpaid, the holder of the lien can pursue a motion in court to have the property sold so the debt is paid off, called foreclosure.
Mechanic’s lien
A claim held against a property by a person who has completed work on it yet has not been paid. When this occurs they file the mechanic’s claim. If property is sold to a new owner before the debt is paid, the lien transfers to the new owner.
Encumbrances
Can limit enjoyment of the property owner through a diminished used of the property such as an
- easement,
- license
- encroachment.
Easement
The right to use another person’s land for a specific purpose, such as access to your property, including airspace easement as well as right of way easements.
Easements are very common and can be bought, sold, leased or given away.
Types of Easements
Types based on the need, the creation of the easement, or the usage of the easement.
Voluntary easements:
- Easement Appurtenan,
- Party wall easement
- Easement in gross
Involuntary Easements:
- Easement by necessity
- Prescriptive easements
Easement Appurtenant (Voluntary Easement)
Is an easement that benefits one parcel of land, known as the dominant tenement to the detriment of another parcel of land known as the Servant Tenement.
EA is attached to the land and are transferred automatically when the servient or dominant tenement is sold to a new owner.
An Easement appurtenant would be considered for public use by all parties accessing either property.
Whoever is allowed to use the easement on someone else land is the dominant and the other party a servient
Party Wall Easement (Voluntary easements)
Is an exterior wall that straddles the lot line and is used by two buildings.
Each party owns half of the wall on their respective property.
Both share an easement appurtenant with the other owner for the other half of the wall.
Generally, all expenses to build and maintain the wall are shared by the owners.
Easement in Gross (Voluntary easements)
Is the right of only one party to treat something as an easement, not the public.
Examples:
Utility
Railroad
Right of way easements such as swears and pipelines.
Easements of gross are not for public use but are only for the company that owns them.
Easement by Necessity (Involuntary Easement)
Created when a landowner sells a parcel of property that has no legal ACCESS for entry. It is landlocked.
This easement is granted buy court order due to necessity rather than convenience.
The right of possession is one of the property rights granted in a sale and therefore must be granted to the new owner. (ingress and egress rights is implied )
Easement by Prescription (or prescriptive easement)
Where one party claims use of another’s property per state statute.
Most states require 10 to 21 years of usage before a claim can be made for an easement by prescription.
Furthermore usage must be:
1. Continuous
2. Hostile (without the owner’s permission)
3. Nonexclusive ( the owner isn’t excluded form the use of the property)
The use must be open, visible, and notorious and the owner must have been able to learn about it.
License vs easement
License is a personal privilege granted to a property owner by an adjacent landowner to use his property.
A licence is usually not formally record but rather created orally between property owners.
A licence can be terminated at will by either party upon death of either party or upon sale of either party.
Encroachment
An encroachment revers to a physical piece of permanent property from a neighbor’s house that illegally lies on an adjoining neighbor’s property. Ie a fence.It will be noted in surveys and title insurance policies until it’s removed.
The neighbor who owns the land where the fence sits on has the right to seek financial damages due to the loss of use or secure removal of the property.
If the encroachment exceeds the sate’s required prescriptive time frame, it may create a prescriptive easement.
Private Restrictions and Deed Restriction
Private: Are considered an encumbrance because they limit the right of control of a property.
Deed: are restrictions used to limit the control of all future property owners who acquire the property through a legal sale. Deed restrictions are written and run with the land.
Deed restrictions may not violate local, state or federal law and any attempt to do so would be considered illegal and unenforceable in a court of law.
Covenants, Conditions and Restrictions (CCR)
Created by the original builder to protect the value of a neighborhood subdivision by demanding compliance with certain requirements such as shape, size or style of homes to be built.
CCRs are created and recorded in the public records were the property is located along with the initial subdivision development plan.
They are incorporated by reference into the deeds to the individual purchasers upon the initial sale of the property.
Enforcement of the CCRs is assigned to the developer as long as he still maintains an interest in the development; its then passed to the property owners with future sales.
Homeowner Associations (HOA)
Another form of private restrictions that limit the right of control of property.
An HOA is created by the actual homeowners and governed by an electoral board. The HOA can determine any rules and regulations it thinks will benefit the homeowners that are not already incorporated by any deed restrictions or CCRs.
Some HOAs turn over the control of the HOA to professional management companies to govern and enforce the rules and regulations.
Creating Easments
An easement may be:
- Express
- Implied
- Prescription
Are usually created by conveyance in a deed or some other written document such as a will or contract.
It requires the same formalities as the transfer or creation of any other interests in land, such as a written instrument, a signature and proper delivery of the document.
Express easement
Must be a written agreement between landowners granting or reserving an easement.
must be signed by both parties and are typically recorded with the deeds to each property.
Implied easement
May be created only when two parcels of land were at one time treated as a single tract or owned by a common owner.
Therefore, Easement Appurtenant (Is an easement that benefits one parcel of land, known as the dominant tenement to the detriment of another parcel of land known as the Servant Tenement.) may arise by implication.
However, Easements in Gross are not implied (only one property owner has the right of use).
Removing Easements
Most easements run with the land or pass forward in effect to new owners of the involved properties. But there are reasons that would render an easement of no further use or ways easements can be terminated.
An easement can be removed when:
- Original creator of the easement is now deceased.
- The two parcels of land are Merged and the owner acquires and merges both properties.
- Release Agreement from both property owners. If new owners of both properties no longer is interested or use is of no use to the dominant owner, the easement can be terminated by a release document FROM the dominant property owner to the servant owner.
- Abandoned easement: If the holder of the easement no longer uses the property which cancels the easement by showing that the easement holder no longer intends to use the rights granted by the easement. Must demonstrate obvious intent to abandon ALL future use of the easement.
- Reason for easement is destroyed or terminated, easement is moot. Like the destruction of a party wall terminates the easement.
