Types of Real Estate Encumbrances

A real estate encumbrance is a restriction placed on the use of a property. If you have an encumbrance on your property, it may restrict your ability to transfer the title. Here are the types of encumbrances that can be placed on real property.

Liens

A lien can be placed on a house to obtain a financial obligation from the homeowner. For example, a mortgage is the most common form of a lien between a homeowner and a lender. The lien will stay on the property until the mortgage is paid in full. Liens that are forced on the property owner include tax liens, for unpaid taxes or a judgement lien. A contractor can have a mechanic’s lien imposed for non-payment of repairs or work completed on the property. The consequence of not satisfying a lien on a property is a foreclosure sale with the net proceeds going towards paying off the debts of the owner.

Deed restrictions

A deed restriction is an encumbrance that usually runs with the land. Also known as restrictive covenant, this encumbrance tells the homeowner what they cannot do with their property. A deed restriction can be anything from restricting an owner from placing a satellite dish on their property, to where cars may be parked on a property. These restrictions are put in place to maintain a standard for the uses of the property. The restrictions are added as a means to protect property values. You will most often find these deed restrictions in new property developments, however, some deed restrictions are put in place to protect historically important structures. 

Easements

An easement is the legal right to use a property without owning it. For example, a utility company has the right to place power lines on a property. Another type of easement involves two adjacent properties, with two different owners. This appurtenant easement will allow one owner the right to access the property of the other. An example of this is the right to access the beach on a walkway that is cutting through another owner’s property. This type of real estate encumbrance also runs with the land.

Encroachments

An encroachment is a piece of property that is crossing over the boundary lines onto an adjacent property. Building a fence inside the lines of an adjacent property or allowing tree branches to hang into a neighbor’s yard are considered encroachments. This is usually determined when a surveyor discovers the encroachment in preparation for the sale of a property. The other property owner may require the encroachment to be removed. Also, an encroachment can create problems when trying to transfer the title to a new owner.

License

A license is the privilege to use another’s property. However, this privilege can be revoked at any time. An example of a license is allowing a neighbor to store their car in your garage.

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