Unit 5 Encumbrances

Commercial

A commercial easement in gross is granted to a business entity rather than a private party. The duration of the commercial easement is not tied to anyone's lifetime. The right may be assigned, transferred, or willed. This type of easement is usually owned by the government, a government agency, or a public utility.

One difference between a condition and a covenant is that

A condition can only be created only when there is a transfer of ownership

Deed restriction

A deed restriction is a limitation imposed on a buyer's use of a property by stipulation in the deed of conveyance or recorded subdivision plat. A deed restriction may apply to a single property or to an entire subdivision. A developer may place restrictions on all properties within a recorded subdivision plat. Subsequent re-sales of properties within the subdivision are thereby subject to the plat's covenants and conditions.

Most liens do not convey ownership. What is the one exception to that rule?

A mortgage lien conveys legal title to the lender.

Municipal utility lean

A municipality may place a utility lien against a resident's real property for failure to pay utility bills.

Personal

A personal easement in gross is granted for the grantee's lifetime. The right is irrevocable during this period but terminates on the grantee's death. It may not be sold, assigned, transferred or willed. A personal gross easement differs from a license in that the grantor of a license may revoke the usage right. We'll talk about licenses on an upcoming screen.

For a prescriptive easement order to be granted the following circumstances must be true

Adverse and hostile use - The use has been occurring without permission or license. Open and notorious use - The owner knows or is presumed to have known of the use. Continuous use - The use has been generally uninterrupted over the statutory prescriptive period.

Easement by grant

Also known as easement by reservation, easement by grant is created with the express written agreement of the property owners In conveying land by deed, if the grantor wants to reserve certain easement rights, he or she can stipulate such in the deed itself.

In which kind of easement is there a dominant tenement and a servient tenement?

An easement appurtenant

Easement by necessity

An easement by necessity is an easement appurtenant granted by a court of law to a property owner because of a circumstance of necessity, most commonly the need for access to a property. Since property cannot be legally landlocked, or without legal access to a public thoroughfare, a court will grant an owner of a landlocked property an easement by necessity over an adjoining property that has access to a thoroughfare. The landlocked party becomes the dominant tenement, and the property containing the easement is the servient tenement.

Easement in gross

An easement in gross is a personal right that one party grants to another to use the grantor's real property. The right does not attach to the grantor's estate. It involves only one property, and, consequently, does not benefit any property owned by the easement owner. There are no dominant or servient estates in an easement in gross. An easement in gross may be personal or commercial.

Easements

An easement is an interest in real property that gives the holder the right to use portions of the legal owner's real property in a defined way. An easement does not give any possessory rights, just the right of ingress (enter) and egress (exit). For that reason, an easement is said to be a non-possessory interest in property owned by someone else.

Essential characteristics of easements include:

An easement must involve the owner of the land over which the easement runs, and another, non-owning party. One cannot own an easement over one's own property. An easement pertains to a specified physical area within the property boundaries. An easement may be affirmative, allowing a use, such as a right-of-way, or negative, prohibiting a use, such as an airspace easement that prohibits one property owner from obstructing another's ocean view.

Enroachment

An encroachment is the unauthorized, physical intrusion of one owner's real property into that of another. Examples are: A tree limb extending into the neighbor's property, violating his or her airspace A driveway extending beyond the lot line onto the neighbor's land A fence built beyond the property line

Involuntary lien

An involuntary lien is one that a legal process places against a property regardless of the owner's desires.

Necessity

As mentioned earlier, a court decree creates an easement by necessity to provide access to a landlocked property.

The receiver of the easement right is the

Benefited party

Lien

Can be placed on the property's title thereby restricting the owners ability to transfer clear title to another party

Transfer

Easement appurtenant rights and obligations automatically transfer with the property upon transfer of either the dominant or servient estate, whether mentioned in the deed or not. For example, John grants Mary the right to share his driveway at any time over a five-year period, and the grant is duly recorded. If Mary sells her property in two years, the easement right transfers to the buyer as part of the estate.

If the owner of property A has a court-ordered easement to drive across property B because it is the only way for A to have access to a public road, the easement is a(n)

Easement by necessity

An improvement which crosses over the property line without permission is called a(n)

Encroachment

Example of a lien

For example, a homeowner borrows $5,000 to pay for a new roof. The lender funds the loan in exchange for the borrower's promissory note to repay the loan. At the same time, the lender places a lien on the property for $5,000 as security for the debt. If the borrower defaults, the lien allows the lender to force the sale of the house to satisfy the debt.

Federal and State inheritance taxes

Inheritance tax liens arise from taxes owed by a decedent's estate. The lien amount is determined through probate and attaches to both real and personal property.

Which is NOT a superior lien? Special assessment lien Real estate tax lien Federal and state inheritance tax lien Judgment lien

Judgment Lien

A film company wants to rent a farm from the farm owner for a two-week film shoot. What type of agreement should be used?

License

A homeowner wants to give a neighbor seasonal permission to cross her yard to reach a public basketball court. What kind of lien or encumbrance should she use?

License

Which of the following statements about liens is FALSE? There may be multiple liens against a property. Liens always convey ownership. An owner acquires existing liens along with the property. A lien terminates once the debt is paid and satisfaction is recorde

Liens always convey ownership

Special Assessment lien

Local government entities place assessment liens against certain properties to ensure payment for local improvement projects, such as new roads, schools, sewers, or libraries. An assessment lien applies only to properties that are expected to benefit from the municipal improvement.

Which of the following is an example of a voluntary lien? Judgment lien Mortgage lien Vendee's lien Mechanic's lien

Mortgage lien

Property A and property B share a common wall along the property boundary. To ensure that neither owner destroys the wall, the owners of A and B should create

Party wall easement

How is a lien terminated?

Payment of the debt that is the subject of the lien and recording of the satisfaction

A real estate tax lien, a federal income tax lien, a judgment lien, and a mortgage lien are recorded against a property. Which lien will be paid first when the property is sold?

Real estate tax lien

What type of lien takes priority over all other liens?

Real property tax lien

Deed restrictions typically apply to

The land use The size and type of structures that may be placed on the property Minimum costs of structures Engineering, architectural, and aesthetic standards, such as setbacks or specific standards of construction

Real estate tax lien

The local legal taxing authority annually places a real estate tax lien, also called an ad valorem tax lien, against properties as security for payment of the annual property tax. The amount of a particular lien is based on the taxed property's assessed value and the local tax rate.

Two elements are essential to this type of easement

There must have been a common grantor of the dominant and servient estates. There must be a reasonable necessity for the easement, not just for convenience.

A property built 23 years ago had a roof overhang that extended 1½ feet onto a neighbor's property. What could happen?

This could create an easement by prescription.

How are easements created?

Voluntary action Necessity Prescriptive operation of law Grant or reservation Implication Government power of eminent domain (condemnation)

A mortgage lien is a type of

Voluntary lien

Lien Priority

Within the superior and inferior categories, a ranking of lien priority determines the order of the liens' claims on the security underlying the debt. The highest ranking lien is first to receive proceeds from the foreclosed and liquidated security. The lien with lowest priority is last in line. The owner receives any sale proceeds that remain after all lienors receive their due.

An encroachment is

an unauthorized physical intrusion of one property into another.

Types of easements

appurtenant and gross

The giver of the easement right is the

burdened party

A lien is a

creditor's claim against property as security for a debt of the property owner.

Two factors that primarily determine lien priority

the lien's categorization as superior or junior the date of recordation of the lien

Superior liens

- They get paid first They include Real estate tax liens Special assessment liens Federal estate tax liens State inheritance tax liens

Types of Encumbrances

- Those that affect the property's use and those that affect legal ownership, value, and transfer - Easements and Liens

Easement

- enables others to use the property regardless of the owners desires

Which of the following is an example of an easement by necessity? A court grants a land-locked owner the right to use a neighbor's driveway for access. Two neighbors agree the build a fence and share ownership of the fence. An owner invites a neighbor to use his swimming pool while the owner is away for the summer. A person habitually parks his recreational vehicle on his neighbor's yard because his own driveway is not large enough to hold it.

A court grants a land-locked owner the right to use a neighbor's driveway for access

What is a lien?

A creditors claim

General lien

A general lien is one placed against any and all real and personal property owned by a particular debtor. An example is an inheritance tax lien placed against all property owned by the heir.

Judgment liens

A judgment lien attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor. The creditor may obtain a writ of execution to force the sale of attached property and collect the debt. After paying the debt from the sale proceeds, the debtor may obtain a satisfaction of judgment or release of judgment to clear the title records on other real property that remains unsold.

What is a judgment lien and how long does it last?

A judgment lien results from a lawsuit. It attaches to real and personal property as a result of a money judgment issued by a court in favor of a creditor. It lasts for ten years, unless the period is extended as provided within the code.

Licenses

A license, much like a personal easement in gross, is a personal right that a property owner grants to another to use the property for a specific purpose. Licenses are not transferrable and do not attach to the land. They cease on the death of either party, or on the sale of the property. Unlike a personal easement in gross, a license is revocable at any time. Licenses are often granted informally, as a verbal statement of permission. A farmer granting a neighbor permission to cross his land to reach and fish in his pond is an example of a license.

Lien

A lien is a creditor's claim against personal or real property as security for a debt of the property owner. If the owner defaults, the lien gives the creditor the right to force the sale of the property to satisfy the debt.

Effects on title (lien)

A lien is an encumbrance that restricts the free and clear ownership of the property. If a property is being sold, all liens should be paid in full before the property transfers ownership. Depending on the kind of lien, non-payment could trigger a foreclosure action and if the property has transferred ownership, the new owner is in danger of losing the property. Title insurance can protect the buyer in such a situation. The title search will uncover any liens against the property and serve as notice to the prospective buyer of the condition of the title. We'll talk more about title insurance in a later chapter.

How can the priority order of a junior lien be changed?

A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien's position in the hierarchy.

Subordination

A lienor can change the priority of a junior lien by voluntarily agreeing to subordinate, or lower, the lien's position in the hierarchy. This change is often necessary when working with a mortgage lender who will not originate a mortgage loan unless it is senior to all other junior liens on the property. The lender may require the borrower to obtain agreements from other lien holders to subordinate their liens to the new mortgage.

Mechanics lien

A mechanic's lien secures the costs of labor, materials, and supplies incurred in the repair or construction of real property improvements. If a property owner fails to pay for work performed, or materials supplied, a worker or supplier can file a lien to force the sale of the property and collect the debt. Any individual who performs approved work may place a mechanic's lien on the property to the extent of the direct costs incurred. Note that unpaid subcontractors may record mechanic's liens whether the general contractor has been paid or not.

Party wall easement

A party wall is a common wall shared by two separate structures along a property boundary. Party wall agreements generally provide for severalty ownership of half of the wall by each owner, or at least some fraction of the width of the wall. In addition, the agreement grants a negative easement appurtenant to each owner in the other's wall. This is to prevent unlimited use of the wall, in particular a destructive use that would jeopardize the adjacent property owner's building. The agreement also establishes responsibilities and obligations for maintenance and repair of the wall.

Voluntary Action

A property owner may create a voluntary easement by express grant in a sale contract, or as a reserved right expressed in a deed.

Voluntary lien

A property owner may create a voluntary lien to borrow money or some other asset secured by a mortgage.

Specific lien

A specific lien attaches to a single item of real or personal property and does not affect other property owned by the debtor. A conventional mortgage lien is an example, where the property is the only asset attached by the lien.

Vendee's lien

A vendee's lien may be placed by a buyer when the seller has not delivered the title after all other terms of the contract have been satisfied.

Vendor's Lien

A vendor's lien, also called a seller's lien, secures a purchase money mortgage, a seller's loan to a buyer to finance the sale of a property. By statute, a seller has a vendor's lien when the cash has not yet been received for the property.

Easement Appurtenant

An easement appurtenant gives a property owner a right of usage to portions of an adjoining property owned by another party. The property enjoying the usage right is called the dominant tenement, or dominant estate. The property containing the physical easement itself is the servient tenement, since it must serve the easement use. The term appurtenant means "attaching to." An easement appurtenant attaches to the estate and transfers with it unless specifically stated otherwise in the transaction documents. More specifically, the easement attaches as a beneficial interest to the dominant estate and as an encumbrance to the servient estate. The easement appurtenant then becomes part of the dominant estate's bundle of rights and the servient estate's obligation, or encumbrance.

Encumberance

An encumbrance is an interest in and right to real property that limits the legal owner's freehold interest. In effect, an encumbrance is another's right to use or take possession of a legal owner's property, or to prevent the legal owner from enjoying the full bundle of rights in the estate. An encumbrance does not include the right of possession and is therefore a lesser interest than the owner's freehold interest. For that reason, encumbrances are not considered estates. However, an encumbrance can lead to the owner's loss of ownership of the property.

Easement by implication

An implied easement can be created when a grantor conveys a portion of the real estate he or she owns or when he or she divides a larger tract among separate grantees. In either case, a severance of parcels occurs, which is a necessary prerequisite to an implied easement. For example, property owner Jess sells off the mineral rights to his property. The mining company has an easement by implication to go onto the property to mine the minerals - but mining is the only reason the company may enter the property.

Which of the following is NOT a legal property of liens? Attaches to the property. Terminates when payment is recorded. Generally conveys an equitable interest. Can only exist one at a time against the same property.

Can only exist one at a time against the same property

Easements terminate by:

Express release of the right by the easement holder Merger, as when a dominant tenement acquires the servient property, or vice versa Purposeful abandonment by the dominant tenement Condemnation through eminent domain Change or cessation of the purpose for the easement Destruction of an easement structure, such as a party fence Non-use of an easement by prescription

All tax liens other than those for ad valorem, assessment, and estate tax are junior liens the include:

Federal income tax lien -- placed on a taxpayer's real and personal property for failure to pay income taxes State corporate income tax lien -- filed against corporate property for failure to pay taxes State intangible tax lien -- filed for non-payment of taxes on intangible property State Corporation Franchise Tax Lien -- filed to ensure collection of fees to do business within a state

Inferior liens

Federal income tax liens State corporate income tax liens State intangible tax liens Judgment liens Mortgage liens Vendor's liens Mechanic's liens (priority by date work was performed)

Party wall easement example

For example, Helen and Troy are adjacent neighbors in an urban housing complex having party walls on property lines. They both agree that they separately own the portion of the party wall on their property. They also grant each other an easement appurtenant in their owned portion of the wall. The easement restricts any use of the wall that would impair its condition. They also agree to split any repairs or maintenance evenly.

Easement by condemnation

Government entities can create easements through the exercise of eminent domain, wherein they condemn a portion of a property and cause it to be sold "for the greater good." A typical example is a town's condemnation of private land to create a new municipal sewer system. Most work to create new highways, roadways and sidewalks and to install utilities is the result of eminent domain.

What is a mechanics lien?

If a property owner fails to pay for work performed or materials supplied, a worker or supplier can file a mechanic's lien to force the sale of the property and collect the debt.

Wage Lien

If an employer owes back wages to an employee, a wage lien can be set against all real and personal property of the employer. If the money cannot be collected, then a lien may be filed as a permanent record of the debt owed to the claimant by the employer.

Easement by perscription

If someone uses another's property as an easement without permission for a statutory period of time and under certain conditions, a court order may give the user the easement by prescription, regardless of the owner's desires.

Mortgage and trust deed lien

In lien-theory states, mortgages and trust deeds secure loans made on real property. In these states, the lender records a lien as soon as possible after disbursing the funds, in order to establish lien priority. If a mortgagor defaults, the lender forecloses and the property is put up for sale to satisfy the debt on the mortgage. Lenders usually require a first mortgage lien. This means that no other liens on the property will take priority over the mortgage, except for the property tax lien we just discussed. The lien is removed when the property is fully paid for. The lender will sign a satisfaction certificate to remove the lien.

Surety bail bond lean

In some states, a real estate owner may put up real estate instead of cash to pay bail if he or she has been charged with a crime. A surety bail bond lien is recorded if the owner can prove that he or she has a net worth of at least twice the amount of the bail. Homestead property cannot be levied against for surety bail bond lien.

Which would terminate an easement?

Merger of the two properties

What factors determine lien priority?

The lien's categorization as superior or junior The date the lien was recorded

Easement for light and air

Unlike the easement by necessity, where an owner has the right to access when his or her property is landlocked, no such right exists to light and air. A neighbor is within his or her rights to build a structure that "cuts off" an adjoining property owner's "light and air.

Easements may be created by

Voluntary action Necessity Prescriptive operation of law Grant or reservation Implication Government power of eminent domain (condemnation)

An encumbrance is most broadly defined as

another's interest in a real property that limits the interests of the freehold property owner.