An encumbrance in real estate is a legal claim or right against a property. An encumbrance can be placed on a property by the owner, lender, or government.
The most common type of encumbrance is a mortgage, which delivers the lender a legal claim to a specific property that the borrower defaults on the loan.
Other types of encumbrances include easements, liens, and zoning restrictions.
What Is a Property Owner?
A property owner is someone who owns a piece of real estate, which can include a home, land, or commercial building.
Property owners have certain rights and responsibilities, such as the right to use and occupy the property, the right to sell or lease it, and the responsibility to pay taxes on it.
They also must maintain the property and follow local zoning laws.
What is an encumbrance?
An encumbrance is a legal claim or lien on the property that limits the owner's use of or title to the land. An encumbrance can be in the form of an easement, mortgage, lease, or deed restriction.
An easement is a right to use someone else's land for a specific purpose, such as a right-of-way for a road or utility line.
A mortgage is a loan secured by real estate; the borrower gives the lender a lien on the property as collateral for the loan.
A lease is a contract giving someone the right to use the property for a certain period, usually in exchange for rent.
A deed restriction is a limitation placed on the use of land when it is sold, such as prohibiting commercial development on residential property.
Encumbrances can have positive or negative effects on landowners and potential buyers.
Common Types of Encumbrances In Real Estate
Six of the most common types of encumbrances are:
1 - Liens
A lien is a legal claim or right against a property. This gives the lien holder the ability to sell the property to satisfy the debt owed.
Liens can be placed on both real and personal property, and are often used as a way to secure payment for services rendered or materials supplied.
There are different types of liens, including voluntary and involuntary liens. Voluntary liens are placed on property with the owner’s consent, while involuntary liens are placed without the owner’s consent.
If you owe back taxes, the IRS can place a tax lien on your property. A tax lien is a legal claim against your property. The IRS can use a tax lien to collect the money you owe.
A tax lien gives the IRS the right to take your property if you do not pay your taxes. The IRS can also use a tax lien to collect interest and penalties on your unpaid taxes.
If the IRS places a tax lien on your property, it will affect your credit score. This can make it difficult to get a loan or buy a new home.
You can avoid a tax lien by paying your taxes on time. You can also request a payment plan from the IRS if you cannot pay your taxes in full.
A mortgage lien is a legal claim on a real property that secures the payment of a debt. The holder of the lien has the right to foreclose on the property if the debt is not paid.
Mortgage liens are typically placed on real estate by lenders, but they can also be placed on other types of property, such as vehicles.
Mortgage liens are one type of lien that can be placed on real estate. A mortgage lien secures the repayment of a loan used to purchase the property.
If the borrower stops making payments on the loan, the lender can foreclose on the property to recoup its losses.
Mortgage liens are typically placed by banks or other financial institutions, but they can also be placed by private individuals.
2 - Deed Restrictions
Deed restrictions are one of the most common types of encumbrance in real estate.
A deed restriction is a legal agreement between the owner of a property and another party, typically a government entity or nonprofit organization, that limits the use of the property.
Deed restrictions are often used to preserve open space, protect historic buildings, or promote affordable housing.
Deed restrictions can be placed on a property by its owner or by a third party.
When deed restrictions are placed on a property by its owner, they are typically done so for conservation purposes or to prevent future development that could negatively impact the property’s value.
For example, an owner may place a deed restriction on their land that prohibits any future development to protect the natural beauty of the area.
Deed restrictions placed by third parties are often done so for political or social reasons.
3 - Easements
An easement is a type of encumbrance that gives someone the right to use your property for a specific purpose. For example, you may have an easement that gives your neighbor the right to use your driveway to access their property.
Easements can be either positive or negative.
- Positive easements give the holder the right to do something on your property, like build a fence or plant trees.
- Negative easements restrict the holder from doing something that would otherwise be allowed, like building a structure that blocks your view.
Easements are generally created by agreement between the parties involved, but they can also be imposed by courts or government agencies.
Easements can be transferred from one owner to another, but they typically stay with the land itself rather than the owner.
4 - Encroachments
An encroachment is defined as an unauthorized invasion or intrusion onto another person's property. Three types of encroachments can occur in real estate: physical, legal, and easement encroachments.
Physical encroachments are the most obvious type of encroachment and occur when there is a physical structure or object on your property that shouldn't be there. This could be something as small as a fence that was built slightly over the property line, or it could be something as major as a house that was built completely on your land.
Legal encroachments are less visible, but can still have a significant impact on your property rights. These usually occur when someone has been using your land for a long period without your permission and you haven't taken any action to stop them.
5 - Zoning Laws
In real estate, an encumbrance is anything that limits or affects a property's title.
Zoning laws are one type of encumbrance that can impact a property owner's use of the land.
Zoning laws are enacted and enforced by local governments and dictate how the land can be used within their jurisdiction.
For example, a residential zone may only allow for single-family homes, while a commercial zone may allow for businesses and high-density housing.
Zoning laws can also impact the development of a property, such as restricting the height of buildings or the types of businesses that can operate there.
6 - Claims Against Title Search
An encumbrance is any claim or right against a property, which may reduce the value of the property or make it more difficult to sell. Many different types of encumbrances can be found during a title search, and it is important to understand what they are and how they may affect the property.
One common type of encumbrance is a mortgage. A mortgage is a loan that is secured by the property, and if the borrower defaults on the loan, the lender may foreclose on the property.
Another common type of encumbrance is a lien. A lien is a claim against the property for unpaid debts, such as taxes or contractor fees. If the debt is not paid, the lienholder may be able to foreclose on the property.
Other types of encumbrances include easements and restrictive covenants.
A restrictive covenant is a legal agreement between two parties that limits what one of the parties can do with their property. For example, a homeowner may agree not to build any structures on their property that would block the view of their neighbor’s property.
Speak With A Real Estate Agent or a Real Estate Attorney About Encumbered Property
If you're thinking about buying a piece of property, it's important to understand the legal encumbrances that may be attached to it.
These encumbrances can include things like mortgages, liens, and easements.
A real estate professional or attorney can help you understand what a legal encumbrance mean and how it might affect your ability to use or sell the property.
Remember to always do your due diligence.