Encumbrances Flashcards
- Which of the following is the best definition of encumbrance?
A. The degree, quantity, and extent of interest a person has in real property.
B. Anything that affects or limits the fee simple title to or value of property.
C. The use of property as security for a debt.
D. Any action regarding property, other than acquiring or transferring title.
B. Anything that affects or limits the fee simple title to or value of property.
- Is a non-possessory interest in real property that is held by someone who is not the owner.
- Anything that burdens or affects:
- Title
- Use of the property
- Property is encumbered when burdened with
- legal obligations against the title.
- Most buyers purchase encumbered property.
A land owner owns fifty acres with a five acre lake centrally located on the land. When the owner sells off twenty acres which border the lake, it is stated that the
owner retains a permanent right to access the lake for recreational purposes.
This would best be accomplished through:
- An easement appurtenant
- A five-year lease, renewable at the seller’s option
- A license
- A lien against the property
- An easement appurtenant
- Easement – The rights to use the land for a particular purpose. Affect the physical use of property are easements, building restrictions, zoning requirements and encroachments.
- License – The revocable permission to use the land of another
- Lien – A financial charge against the land
- Appurtenant – Runs with the land
While all liens are encumbrances, all encumbrances are not always liens.
Easement
• is the right to enter or use someone else’s land for a specified purpose.
• An interest in an easement is non-possessory.
• That means the holder of an easement can use it only for the purpose intended and may not exclude anyone else from using it.
• The right to enter onto a property using an easement is called ingress (enter).
• The right to exit from a property using an easement is called egress (exit).
The two types of easements are:
- Easements in Gross and Non-financial
- Servient and Dominant
- Financial and Non-financial
- Judicial and Non-judicial
- Financial and Non-financial
Two Types:
Financial - Voluntary and Involuntary Liens
Non-Financial - Easements and Restrictions (Physical)
Servient Tenement - Owns the Easement (on their land)
Dominant Tenement - Right to use (ex, Ingress/Egress)
- If either property is sold, Easement Remains
Easement in Gross - Servient Tenement ONLY - Ex., Utilities across land
Which of the following would constitute both a lien and an encumbrance against a property?
- A restrictive covenant
- A lease providing the mineral rights to another
- Property taxes
- An easement
- Property taxes
• While all liens are encumbrances, all encumbrances are not always liens
• Real property taxes are the highest, best lien
– Always paid first
• A lease is not a lien
– It’s an estate
Which of the following would be an encumbrance against a property?
- An encroachment
- Property taxes
- Mineral rights
- A license
- Property taxes
• While all liens are encumbrances, all encumbrances are not always liens
• Encroachment
– Physical trespass on property by a building or thing
• Property taxes
– First priority if they become a lien
– Current year property taxes are not a lien
- Mineral rights – Appurtenances that “run with the land”
- License – Permission to use property
- Easement – Right to use property
Easement = right License = permission
Which of the following is true about a mechanic’s lien?
- It is termed a general lien
- It cannot be foreclosed
- It always has the highest priority
- Could be filed by a subcontractor for providing work or materials
- Could be filed by a subcontractor for providing work or materials
- General liens are against everything you own
- Specific lien (like taxes) are against one item
- Real property taxes have the highest priority
- Could be filed by general contractor or subcontractor
The form of encumbrance that makes specific property the security for the payment of a debt or discharge of an obligation is called a:
A. reservation
B. fief
C. lien
D. quitclaim
C. lien
– A financial charge against the land
• General lien
– Against everything you own
• Specific lien
– Just against one item
Dana sold a property to Kim, who did not record the deed but did occupy the premises. Dana then sold the same property to Lee, who did not inspect the property but did record the deed. After the second sale, who would have legal title to the property?
A. The title would revert to Dana as the remainderman.
B. The title would remain with Kim.
C. The title would be Lee’s due to Kim’s failure to record his deed.
D. Lee would be able to sue Kim for his failure to record his deed.
B. The title would remain with Kim
- Possession is considered constructive notice, just like recording.
- If a deed is not recorded, but the buyer moves in, that sale has priority over any later recorded deeds.
An owner of a parcel of real property gave his neighbor a deed conveying an easement for ingress and egress. The easement was not specifically located in the deed. Under the circumstances, the neighbor’s right to use the easement is:
A. enforceable because the location of the easement does not need to be specified.
B. enforceable only if the easement is an easement in gross.
C. unenforceable because the location of the easement must be specified.
D. unenforceable because easements are never created by deed, only by written agreement
A. enforceable because the location of the easement does not need to be specified.
- Ingress and egress mean to enter and to exit.
- An easement may be created by deed or written agreement, which is express grant.
- An unlocated easement is valid.
The four Essential Steps for a Mechanic’s Lien include:
- Preliminary Notice
- Notice of Completion
- No Notice of Completion
- All of the above
- All of the above
- Preliminary Notice: Written notice that must be given to owner within 20 days of first furnishing labor or materials for a job by anyone eligible.
- Notice of Completion: If owner records a notice of completion within 10 days after the project is finished, the original contractors have 60 days after the notice is filed and all others have 30 days after the notice is filed, to record a mechanic’s lien.
- No Notice of Completion: If the owner does not record a notice of completion when work is finished, all claimants have 90 days from the day work was
finished to record a mechanic’s lien. - Foreclosure Action: Once recorded, the claimant has 90 days to bring foreclosure action to enforce the lien.
Mechanic’s Liens Timeline
- Date Work Begins
- Preliminary 20-Day Notice
- Work Completed
- Notice of Completion Recorded
- Lien Recorded
- Foreclosure Action and Lis Pendens Recorded
- Service of Process
- Court Decision
a) Judgment
b) Release of Lien
c) Dismissed
d) Foreclosure - Lien Priority – the day the work begins
What type of easement would a utility company most likely be granted?
- Easement Appurtenant
- Easement in Gross
- Easement by Necessity
- Prescriptive Easement
- Easement in Gross
- An easement that benefits a person or company, rather than benefiting another parcel of land. An easement that is not appurtenant to any one parcel: Example, public utilities to install power lines.
Appurtenant Easement - Automatically goes with the sale of the dominant tenement. “Runs with the Land”.
Prescriptive Easement - Created by continuous and uninterrupted use, by a single party, for a period of five years. The use must be against the owner’s wishes and be open and notorious. No confrontation with the owner is required and property taxes do not have to be paid. The party wishing to obtain the prescriptive easement must have some reasonable claim to the use of the property. • Notorious, • Open, • Continuous (5 years), • Hostile
Easement by Necessity - parcel that is land locked. Example, parcel needs access to the parcel. County or city will grant easement.
Termination of easements can be done by all of the following except:
- Two parcels merged into one parcel with a new single land description
- When the owner of adjacent parcel buys the adjoining parcel with the easement
- Quiet Title Action
- Both 1 and 3
- When the owner of adjacent parcel buys the adjoining parcel with the easement.
Easements may be terminated when two parcels become one with a new land description. The easement is no longer servient to any other parcel.
Quiet Title Action is a court junction that can remove an easement.
These are all financial encumbrances except:
- Lien
- Specific Lien
- General Lien
- Hypothecation
- Hypothecation
Liens are classified as voluntary or involuntary.
Voluntary Liens - An owner may choose to borrow money, using the property as security for the loan, creating a voluntary lien.
• Hypothecation is a legal arrangement that allows a borrower to remain in possession of a property secured by a loan.
• Collateral is something of value given as security for a debts.
• Deeds of trust and mortgages are the most common types of security instruments used in real estate finance.
• Security instrument is a legal document that is given by the borrower to hypothecate (pledge) the property to the lender as collateral for the loan.
Involuntary Liens - Include judgment liens, tax liens, and mechanic’s liens
• Used to collect money from debtors who have real property among their assets.
• If an owner fails these items, a lien may be placed against his or her property without permission.
- Judgment creditor is the person prevailing in a lawsuit who was awarded money damages.
- Judgment debtor is the person against whom damages were awarded.
Judgement liens:
- May be recorded in the county where the debtor owns the property
- May be recorded in the county where the debtor owns the property and applied to all the property the person owns in that county.
- Once recorded, the lien is applied to the single parcel regardless of the number of parcels owned in that county
- Are only placed on the parcel the creditor gives permission
- May be recorded in the county where the debtor owns the property and applied to all the property the person owns in that county.
- Judgment creditor is the person prevailing in a lawsuit who was awarded money damages.
- Judgment debtor is the person against whom damages were awarded.
- Abstract of judgment is a one-page document that contains information about the court judgment.
- It may be recorded with each county recorder where the judgment debtor owns real property.
- Once recorded, it creates a general lien that applies to all parcels of real property owned by the judgment debtor in that county.
- If it has not expired (last 10 years and can be renewed twice), it automatically will attach to any non-exempt after-acquired real property.
- All judgments earn simple interest at 10% per annum, on the principal amount of the judgment until it is paid.
- Notice of satisfaction of judgment acknowledging payment of the judgment.
- The judgment creditor can simply sit back and allow the judgment lien to collect interest or foreclose on the property.
- Writ of execution. To foreclose the judgment creditor obtains this document from the court and pays the county sheriff a fee to start the foreclosure process.
- The sheriff records a notice of levy with the county recorder, provides various notices to the judgment debtor regarding real property sale.
Mechanic’s liens are:
- specific to one parcel
- considered a specific lien
- take precedent over all other liens
- Only 1 and 2 above.
- Only 1 and 2 above.
• Mechanic Lien is a Specific Lien – Can only be placed on the property where the work was performed
- Priority based on the time of recordation, relating back to the date the work actually began…
- Mechanic’s lien must be verified and recorded.
- The statutory procedure must be followed exactly if the mechanic’s lien is to be valid.
- Statutory lien that secures payment for labor or materials supplied in improving, repairing, or maintaining real property.
- Includes contractors, subcontractors, laborers, materialmen, architects, and other parties who improve a specific parcel of real property
