Unit 3: Encumbrances & Transfer Of Ownership

Question 1

Encumbrance

Answer 1

An encumbrance is a non-possessory interest in real property that is held by someone who is not the owner. Anything that burdens or affects the title or the use of the property is an encumbrance. A property is encumbered when it is burdened with legal obligations against the title.

Question 2

Financial Encumbrances

Answer 2

Encumbrances that affect the title. Common types of financial encumbrances are trust deeds and mortgages, mechanic’s liens, tax liens, special assessments, attachments, and recorded abstracts of judgment. The financial encumbrances that create a legal obligation to pay are known as liens. A lien uses real property as security for the payment of a debt.

Question 3

Lien

Answer 3

A lien is an obligation to pay a financial encumbrance that may be voluntary or involuntary.
All liens are encumbrances but not all encumbrances are liens.

Question 4

Voluntary Lien

Answer 4

When an owner chooses to borrow money, using the property as security for the loan. A voluntary lien does not have to be recorded. Typical voluntary liens include trust deeds and mortgages

Question 5

Involuntary Lien

Answer 5

When the owner does not pay taxes or the debt owed, a lien may be placed against his or her property without permission. Typical involuntary liens include mechanic’s liens, recorded abstracts of judgment, tax liens, and attachments.

Question 6

Specific Lien

Answer 6

A specific lien is one that is placed against a certain property, such as a mechanic’s lien, trust deed, attachment, property tax lien, and lis pendens.

Question 7

General Lien

Answer 7

A general lien affects all property of the owner, such as a judgment lien or federal or state income tax liens.

Question 8

Mechanic’s Lien

Answer 8

A mechanic’s lien may be placed against a property by anyone who supplies labor, services, or materials used for improvements on real property and who did not receive payment for the improvements. A mechanic’s lien must be verified and recorded. The law is very time specific about the recording. The statutory procedure must be followed exactly if the mechanic’s lien is to be valid. There are 4 steps to be taken with a mechanic’s lien.