Types of Encumbrances
September 25, 2020
An encumbrance is some kind of a burden or a limitation. One type of encumbrance is called a lien, which is a money incumbrance. One example is a property tax lien. If you don't pay your property taxes, the government will put a property tax lien against your property. If you never pay the taxes, ultimately, they can take your property and sell it off. Another type of lien would be called a mortgage lien, which is where you put your property up as security for a loan. Think about borrowing money for a house. Most of us will do that, and most of us will give the lender a mortgage on the property so we can have the money to purchase the property. If we don't make our mortgage payments, the lender can foreclose upon us. A mechanic’s lien is a different type of lien for people who make improvements on the property, such as a painter or a plumber. If those folks aren't paid, they can also file a mechanic's lien on the property where they did the work. An income tax lien is for the IRS. If you don't pay the IRS, they can always put an income tax lien against your property. Finally, a judgment is a different type of lien that is for personal debts. If you owe someone money and don't pay them, that person can file a judgment against your property. Out of all these liens, the lien that always takes priority getting paid off at a foreclosure sale is the real estate property tax lien. The government always gets their money first. Everyone else gets in line at foreclosure sales getting paid off based on the recording date on the public record.
A different type of encumbrance is called a deed restriction, which is a use encumbrance dealing with the use of the property. Sometimes these are also called deed covenants, which means the same thing. The grantor typically places these deed restrictions on the property. An example might be that properties in the neighborhood must use a certain type of fence or a certain type of roof. Those will be your deed restrictions. In addition, deed restrictions “run with the land”, meaning they apply to all future owners of the property, not just the person who owns it when the restriction is adopted. The only entity that can enforce these deed restrictions would be the court system. Some common deed restrictions are:
Type of pets, exterior paint color, no businesses, adjacent structures, approving building plans, removing trees, building fences, type and number of vehicles, obstructing a neighbor’s view.
Another type of encumbrance is called an easement. An easement is simply the right to cross over another person's property. There are several types of easements. One is called an appurtenant easement, which is basically what neighbors have to cross over each other's property. An appurtenance is the right privilege or improvement that runs with the land. So, an appurtenant easement would be tied to the property. A different type of easement is called an easement in gross. These are typically for companies such as railroads or utility companies. They will acquire easements to put down their cables or railroad lines and these are called gross easements. A different type is called an easement by prescription, which deals with long-term use. If you, for example, crossovers somebody else's property for 10 or 15 years continuously, openly, and without permission, then you may be able to obtain an easement in that property.
Now, in contrast to an encumbrance, a license is mere permission, such as you get a driver's license to drive a car. So, if you receive a license to cross over someone's property, that is simply permission, not an easement. And finally, an encroachment is trespassing. For example, someone builds a fence onto your property. If that were the case, a neighbor could possibly take you to court to remove the encroachment. The point is, something needs to be done because if someone encroaches on your property and you never say anything if they continue to use that property long enough, they may end up with an easement by prescription.
Principles of Value
January 6, 2021
In this article, we discuss how a property's value is determined, the purpose of appraisals, and the different types of depreciation. Learn more by reading this short and focused article on property appraisal.
January 6, 2021
Since 1866, there have been several acts that protect certain classes and sects of US citizens. In this article we review what each of them did and who is protected under each act.
Approaches to Valuation
January 6, 2021
In this short article, we review the four main approaches for property valuation - Market Data, Cost, Income, and Appraisal. We've outlined these four different approaches in an easy-to-digest manner that will help you learn how properties are appraised and valued.