Real Estate Basics-Encumbrances

Posted by admin on July 3, 2010 under Real Estate License Basics | Be the First to Comment

This edition of Real Estate Basics will cover what you need to know about encumbrances in order to earn your real estate license. An encumbrance on a property is something that interferes with your holding title to a property or someone else having rights to your property. There are many types of encumbrances that will be covered in your real estate courses. Here we will break down these different types of encumbrances for you.

A lien is a type of encumbrance that is a charge against a property to secure a debt. A mortgage lien is the only voluntary type of lien which is the loan taken out to purchase the property. All other types of liens are considered involuntary. A specific lien is one that is placed on one specific property and will only affect that property. Mechanics liens that are filed when repairs or construction are done on the property and Property Tax liens filed when a person fails to pay their property taxes are both examples of specific liens. A general lien is awarded by court judgment and affects not only the property, but the person owning the property at the time of the judgment and all of their assets. Examples of general liens are Income tax liens and Judgment liens.

Another type of encumbrance is an easement. An easement provides specific rights to use a property to someone while you retain the ownership rights. Because there are no rights of possession with an easement, only rights of ingress and egress, an easement is considered interest in the property and not the estate. Easements can occur by implication, reservation, necessity, condemnation, or by express contract. We will explore easements deeper in a future installment of the Real Estate Basics series.

An encroachment is an encumbrance that occurs when an unauthorized building or improvement intrudes onto another property. Some examples of encroachments would be when an addition or a newly erected fence crosses over a property line onto someone else’s property. Encroachments are usually uncovered upon a survey or physical inspection of the property. All encroachments are considered encumbrances even though all encumbrances are not encroachments.

Covenants and deed restrictions are also encumbrances. These are limits of use placed on the property. Limiting restrictions are things that can never be done on a piece of property. An example of a limiting restriction includes things like no fences to be built on the property. Affirmative restrictions are rules that must be abided by such as building setbacks and minimum square footage requirements. Enforcing deed restrictions must always be done in a court of law.

Finally there is a license encumbrance. This type of encumbrance gives the right to use a property for a specific purpose. License is not assignable and can be revoked at any time by whoever issued the license. Some examples of license include tickets to sporting events, hunting and fishing licenses or granting permission to occupy a property temporarily. A license encumbrance is terminated upon the death of the licensee.