Unit 6: Encumbrances in Real Property

The dominant estate owner takes action that shows a clear intent to stop using the easement, such as building a road so there's no longer a need for an easement across a neighbor's property.

Abandonment

A fence that's placed two feet onto a neighbor's property line meets the legal definition of _______.

An encroachment

The devisee or heir at law takes title to the property subject to existing liens or encumbrances and to rights of creditors of the estate

Decedent's debts

(Type of encumbrance) An authorized physical restriction on a property's use; runs with the land

Easement

What is it called when one party has the right to use land owned by another party for a special purpose?

Easement

An easement is one type of encumbrance that can affect a property. Which of these statements about easements is true?

Easements are often established by a written agreement between the parties.

(T/F) Real estate can't be transferred with any kind of encumbrance.

F

(Type of encumbrance) A debt against a property

Lien

If the easement is no longer needed, the easement is terminated. This is similar to abandonment, except that abandonment specifically requires action by the dominant estate's owner.

Necessity discontinues

This type of easement involves two landowners with adjoining property; one holds the dominant tenement or estate; the other the servient.

easement appurtenant

Ex. When Fred sued his contractor, he won a judgment for a ____ against him.

general lien example

(voluntary or involuntary) Federal tax lien

involuntary

(voluntary or involuntary) Judgment lien

involuntary

(voluntary or involuntary) Mechanic's lien

involuntary

A lien imposed on a property or person by someone else, such as for nonpayment of taxes

involuntary lien

Ex. Becky forgot to pay her taxes, and a lien was placed on her property. This was an _________

involuntary lien example

Placed when monetary damages are awarded; can be placed on property until the debt is paid

judgment lien

A lien placed by a laborer on a property for nonpayment of work done

mechanic's lien

Ex. Harry's carpenter put a mechanic's lien on his property for nonpayment of his work.

mechanic's lien example

No right to occupy the property; easements are non-possessory rights

non-possessory

Ex. Because Sheena had an easement to cross Barb's property, but no right to occupy the property, she had a nonpossessory right.

non-possessory example

A right to occupy the property

possessory

Ex. All homeowners have possessory rights to their property.

possessory example

Ex. Because Scott financed his home, his mortgage was a lien against his property. Ok

specific lien example

An agreement to subordinate a senior to a junior lien

subordination agreement

Ex. When Mutt agreed to allow Jeff access to his property to reach the bay, they created an __________. Mutt's estate became servient.

easement appurtenant example

A public notice that a legal issue is pending

lis pendens

Ex. Because Daniel had the right to cross his property, Ben's property had the _______.

servient estate example

A lien that is agreed to, such as a mortgage

voluntary lien

(voluntary or involuntary) Mortgage lien

voluntary. States where lenders use mortgage liens to secure home loans are called lien theory states.

Your client, Jorge, is considering purchasing a rental property subject to an existing lease. What would you and Jorge look for when reviewing the existing lease agreement?

- Lease duration - Rent amount - Possibility for renewal or even property purchase (lease-to-own arrangement) - Property management responsibilities (maintenance, repair, taxes, insurance, etc.)

What is an encumbrance?

A defect on a title that can be monetary or physical

Sondrine's beach cottage has a right of way that allows nearby residents to get to the beach. What is the primary difference between a right of way and an easement?

A right of way provides a pass-through, but not a right to use the property.

Eric didn't have direct access to the small lake in his subdivision; he had an easement arranged with his neighbor. Ten months ago, the developer built a public access road to the lake, so Eric stopped using the easement. What type of easement termination is this?

Abandonment. Easement abandonment is when the dominant estate owner takes action that shows a clear intent to stop using the easement.

What's an Attachment?

An encumbrance on the property of a defendant in a pending lawsuit for money damages under special circumstances, such as when the defendant goes into hiding. When a plaintiff receives an attachment against the defendant, the plaintiff must also file a bond to protect the defendant from any losses the attachment may cause, in case the plaintiff loses the case.

What's the definition of an encroachment?

An intrusion onto another person's property

Your client, Dana, is interested in buying a rental property that currently has tenants. She'd like to rent the property to her relatives a month after she buys it. Which one of the following statements is true and could affect Dana's decision to buy the property?

As the new owner, Dana would become the tenants' new landlord with all the benefits and responsibilities that come with that role. Any pre-paid rent would be transferred to Dana as the new owner, usually at closing, and the tenant would not owe the new owner any additional monies not specified in the lease agreement.

Will was sued for damages related to a car accident in which he was involved last year. As part of the proceedings, the court placed a lien against his primary residence. What type of lien is this?

Attachment

Why is it important for a buyer to know if any easements or encroachments exist on a property?

Both easements and encroachments affect the property's lot size, enjoyment, and use, which can affect a property's value.

Your client, Ada, wants to purchase property that includes a garage apartment that's subject to an existing lease. Ada plans to rent the garage apartment to her sister next year. What should Ada specifically look for when reviewing the existing lease terms to decide if this is the right property for her?

Duration and renewal options

Kurt bought a vacant lot in a development that was 85% completed. When he started working with the builder to lay out where the house and driveway would lie, it was determined that he would need an easement because his driveway would spill over onto the adjacent lot by a few feet. What type of easement is this?

Easement appurtenant

This easement type can only be created for the purpose of ingress and egress—that is, the purpose of entering and exiting the property

Easement by Necessity

created through the continued, uninterrupted, obvious, and adverse—meaning without permission—use of another's property for many years. They also must be exclusive to the party using the property. If permission is granted, or the trespasser in any other way acknowledges the trespass, _________ is not formed.

Easement by Prescription

Without this easement—usually involving access to a road—the owner requiring the right of passage would be landlocked.

Easement by necessity

Gene and Alex bought a property that backed up to a neighborhood park. The previous owner mentioned that ever since the park was built eight years ago, the next door neighbor who works at the park has cut through the yard to get to the park rather than going around via the streets, which saves about half a mile. What kind of easement is this?

Easement by prescription

_______ provide a limited right to use a property for a specified purpose.

Easements

(Type of encumbrance) An unauthorized, affixed intrusion into another's property

Encroachment

Because of the topography of Elsie's and Lawrence's respective yards, Elsie had to install her fence at the top of a hill, which is actually two feet over Lawrence's property line. What word or phrase best describes Elsie's fence?

Encroachment

Sam decided to build a swimming pool in his yard. He built it one foot inside his neighbor's property. What is this an example of?

Encroachment

written documents that typically outline the easement's terms, location, and purpose

Express Easements

Both parties agree, in writing, to terminate the easement.

Express agreement

(T/F) An encumbrance is a claim on a property that increases the value of the property.

F

Attaches to real property due to federal income tax law violation, non-payment of gift taxes, or transfer after the owner's death

Federal tax lien

If John suspects that his neighbor's deck encroaches on his back yard, what should John do to determine whether an encroachment exists?

He should consult a survey for the exact property lines.

Why is it important that all liens be paid in full before a property conveys to a new owner?

If the property transfers to the new owner and liens remain unpaid, the unpaid liens can trigger a foreclosure. The buyer's only recourse would be to pursue legal remedy by suing the seller.

Karen's house was recently foreclosed on to pay off a lien on her home. What happens to any extra money after the lien and expenses of the sale are paid?

It goes to Karen.

A general, involuntary lien against a property due to a court decree resulting from a lawsuit

Judgment lien

When negotiating the purchase of a property that's subject to an existing lease, it's critical for your client to clearly understand the lease terms, including the property management responsibilities, rent amount, renewal/purchase options, and the ______.

Lease duration

What does the concept "first in time" refer to when discussing lien priority?

Liens are paid based on date of filing.

A lien placed by a utility company on a home for outstanding bills; the utility company can foreclose on the home to recoup the balance of those bills

Liens for municipal utilities

The Morris family home went into foreclosure December 15, 2016, and sold January 1, 2017. Their contractor had begun work on May 15, 2015, and was not paid, and finally filed a mechanic's lien on October 1, 2016. What date will be used for lien priority for the mechanic's lien?

May 15, 2015

Oscar bought an older home and hired a contractor to replace the old knob and tube wiring throughout the house. He was invoiced for the work, but 60 days have passed, and Oscar has yet to pay the bill. The electrician filed a lien against Oscar's house. What type of lien is this?

Mechanic's

A specific, involuntary lien placed by contractors or subcontractors against a non-paying client's property

Mechanic's lien

What type of lien protects a laborer who provides new construction on a property but does not get paid?

Mechanic's lien

If one of the parties buys or otherwise attains the other's property, the dominant and servient estates are merged and there's no longer a need for an easement.

Merger

A specific, voluntary lien against a single property that uses the property as collateral for loan repayment

Mortgage lien

Which type of easement is acquired through years of use, with one person acquiring the permanent right to use another's property by doing so for an extended period of time?

Prescriptive easement

A property has just been foreclosed on. Which of the following describes the rules regarding lien priority?

Property tax liens take priority, with all others following a "first in time" rule.

lien priority order

Property tax liens usually take precedence over ALL liens, and a mechanic's lien registered before a mortgage lien takes precedence over the mortgage—in fact, sometimes mechanic's liens are referred to as construction liens.

A specific, involuntary lien against property owners who have not paid property taxes

Real property tax lien

Sam grants Steve a license to hunt deer on his property. Which of the following statements about the license is true?

Sam can revoke the license at any time.

If the Bakers allow their neighbors, the Crandalls, an easement or right of way through their owned field, the Bakers are the _________ tenement in this example.

Servient

An easement dictates that property owner A gives the right to property owner B to use a portion of the property. Which term describes property A?

Servient estate

Nellie and Victor own a suburban ranch home and fell behind on paying their property taxes when Victor lost his job last year. Victor is working again, but they still haven't saved enough to pay their back taxes. They're worried that the county may begin foreclosure proceedings. What type of lien is this?

Specific

Attaches to a taxpayer's real property for not paying state income taxes

State tax lien

(T/F) A license is permission to do something on another's land without actually possessing any interest or ownership in the land.

T

(T/F) A license isn't assignable or inheritable, and it's a temporary privilege.

T

(T/F) An easement is a right to cross over or otherwise use another's land for a specified purpose.

T

(T/F) An encroachment is an intrusion of a structure or object on another's land.

T

(T/F) An encumbrance is a claim on a property held by another person or entity that limits the owner's use or rights.

T

(T/F) Encumbrances can be physical or monetary.

T

(T/F) The owner may revoke a license at any time, unless a termination date has been specified by contractual agreement.

T

Which of the following liens would take priority over the others?

Tax lien

What must happen for an easement to be terminated due to abandonment?

The dominant estate owner takes action that shows a clear intent to stop using the easement.

What happens after a foreclosure if there isn't enough money from the sale to pay off all of the lien holders against a property?

The former owner may owe a debt to lien holders who aren't fully paid.

Which of the following is an example of easement termination by merger?

The owner of a servient estate buys the property of the dominant estate.

What would happen if you bought a house and later found out that there were unpaid liens against the property?

The unpaid liens could trigger a foreclosure on your property.

Your client, Darnell, is interested in buying a rental property that has current tenants. He plans to rent the property to friends the month after he buys it. Which of the following statements is true and could affect Darnell's decision to buy the property?

Unless stated otherwise in the lease, the existing tenants usually have the right to retain possession of a property, even if it's sold during their lease term.

For this type of easement, four criteria must be met: 1. A property is subdivided into at least two separate properties, creating dominant and servient estates from what was once a single property. 2. The easement must be situated in a way that it creates an obvious benefit to the dominant estate, and a burden to the servient estate. 3. The easement must have been used long enough before subdivision to show that it was intended to be permanent. 4. The easement must be reasonably beneficial to the dominant estate

Visible Easement

Ex. Hillside Manor was situated at the end of a long, winding driveway. The owner decided to subdivide his property and build two houses at the end of the driveway closer to the street. Obviously, the owners of those houses would need to use the driveway in order to access their own properties.

Visible Easement example

Hope's mortgage created a lien against the property she purchased with the mortgage. What kind of lien is this?

Voluntary

Brandon's home has been foreclosed on. He had an outstanding loan balance of $145,000, which he owed to his lender, XYZ Lending for a loan taken out in 2009. There's also a lien against the property recorded in 2014 for an unpaid student loan of $25,000, and a HELOC established in 2012 of $30,000, of which he'd used $10,000. If his foreclosure nets $150,000, how much will each creditor be paid?

XYZ Lending will receive $145,000, the HELOC lender will receive $5,000, and the lien holder for his student loan will not be repaid. Priority of liens is dependent on date of recordation. Because the original home loan was in first position, it will be repaid first. That leaves $5,000 for the HELOC lender. The lien from the student loan was recorded last, and won't receive anything.

Usually referred to as CC&Rs, these are the usage limitations imposed on owners/shareholders of a community housing such as a homeowner's association, cooperative, condominium association.

covenants, conditions and restrictions

Ex. In the CC&Rs to Anita's building, it states that residents are not allowed to store bicycles on their balconies.

covenants, conditions and restrictions example

A private control which limits the use or appearance of a given property

deed restriction

Ex. Manny's deed restriction prevented him from using his property to raise horses. Ok

deed restriction example

Kurt bought a vacant lot in a development that was 85% completed. When he started working with the builder to lay out where the house and driveway would be, they found he would need an easement because his driveway would spill over onto the adjacent lot by a few feet. Kurt owns the _______ estate or tenement.

dominant

The recipient or beneficiary of an easement right

dominant estate

(encroachment or easement) Susan lives next to a beach. In order for her neighbors to reach the beach, they must cross through her property.

easement

The easement owner does not own land adjacent to the property on which the easement applies. This is typically a governmental easement or a public utility easement.

easement in gross

Ex. The power company had an easement by gross on Sam's street. It gave the power company the right to come on to Sam's property, and that of his neighbors, to repair lines.

easement in gross example

(encroachment or easement) Jeffery built a swimming pool behind his house. Turns out, the swimming pool is two feet inside his neighbor's property.

encroachment

Seth owns a property on a small island with six other property owners. Recently, Seth built a fishing pier along the water's edge; however, the pier is actually on his neighbor's property, which Seth has no rights to. What might this be an example of?

encroachment

The illegal intrusion of some structure or object across a property boundary line

encroachment

Ex. Jimmy hadn't realized that the three-bay garage he built was an encroachment on his neighbor's property of two feet. He would either have to move it or compensate his neighbors.

encroachment example

A limitation on a property title, such as a lien or easement

encumbrance

Ex. Cathy was happy to see from the title report that the only encumbrance on the property she was buying was a power company's easement in gross.

encumbrance example

One of Jackie's creditors sued her in civil court. As a result of the judgment against her, her house, car, and art collection were all subject to sale in order to pay the creditor. What type of lien is this?

general

A lien against a person and all the property owned by that person, whether real or personal (e.g., judgments, estate and inheritance tax liens, income tax liens)

general lien

Ex. Sally successfully sued Frasier for $10,000 after she slipped on ice outside his house. The court placed a ______ on his home until he paid her the money.

judgment lien example

Steven owns 114 acres of wooded, rural land. The abundance of wildlife on his property means that his friends are always asking for permission to hunt on it during various game seasons. If Steven gives a friend permission to hunt on his land, it can be said that he has given his friend a ______.

license

A creditor's legal right to have their debt paid out of the property of a defaulting debtor, usually by a court sale

lien

Ex. When Marcus did not pay his contractor, the contractor put a mechanic's lien on Marcus's property.

lien example

_______ create an encumbrance on a property's title

liens

Ex. Deena was glad she saw the _______ notice on the property she was considering making an offer on. She didn't need to get halfway through a transaction and find out there was a judgment against the property!

lis pendens example

Elaine owns a home on a flag lot behind James. Her easement for a common driveway runs through James's property. What kind of ownership rights does Elaine have of the driveway that runs through James's property?

non-possessory

Sandra and Dwight are neighbors who share a common driveway, but the driveway is on Dwight's property. What kind of ownership rights does Dwight have of the driveway?

possessory

differ from other easement types because they don't allow usage of the land but instead provide a pass-through

right of way

Ex. A utility company needs an easement granted to build a utility pole in your backyard. The land upon which the pole is situated is the _________; you've granted the utility company permission to let their electricity "pass through" your property. The same goes for any water or gas lines that may run underneath the ground, through countless owners' properties. Railroad companies often seek easements to build across land they don't actually own, giving them _______ usage as they chug-a-lug down the tracks.

right of way example

Ex. Daniel's driveway across Ben's property was a _____ that enabled Daniel to get to work every day.

right of way example

The estate that gives the easement. Think of the ___ as "serving" the needs of the dominant estate.

servient estate

Levied against real property to help fund the cost of a specific improvement (e.g., putting in sidewalks)

special assessment lien

Ex. Owners can pay a special assessment in total, but paying in installments with interest is quite common. If an owner defaults on special assessment payments, the county treasurer has authority to sell the owner's property to pay the assessment

special assessment lien example

A lien levied against real property (e.g., mortgages, mechanic's liens, and materialmen's liens)

specific lien

Ex. Lenders will sometimes agree to subordinate their mortgage lien to another mortgage if they are certain the property value will pay off both mortgages if foreclosure becomes necessary.

subordination agreement example

certain kinds of liens automatically go to the head of the line, regardless of when they're filed.

super lien states

Brent and Kathy recently bought a property in a gated community. While doing some landscaping they noticed that their neighbor's shed seems to be over the lot line and on their property. What should they consult to determine if the shed is an encroachment?

survey

Ex. Scott's mortgage was a ______ against his property

voluntary lien example