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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Encumbrance in Real Estate
When you purchase a real estate property, by law you become the rightful owner of the property and your name is registered on the title.
However, during your life of homeownership, there could be situations where you might voluntarily or involuntarily have to lose the title of the property through encumbrance.
In this post, we will learn what is an encumbrance in real estate in detail.
What Is An Encumbrance?
An encumbrance is something that is placed on the title of the property saying that the owner of the property is unable to sell the property unless the encumbrance is removed.
It is a right or interest in a property that belongs to someone other than the owner of that property.
It is a liability on the property since someone else holds the interest in the property the right is the limit or the restriction on the owner’s use of the property.
What Are The Types of Encumbrances?
I - Easement:
This type of encumbrance is the right to use someone else’s piece of property.
Easements can be created in different ways; however, the most common way to create an easement is by the written agreement of the parties.
A lot of people in the neighborhood might have granted an easement to utility companies so that they can come on your property to install and maintain the utilities that run to your property and don’t even know about it.
Other common types of an easement are shared driveways or giving someone the right to cross your land to get to a certain landmark.
There are also easements to restrict specific use on the land. This is called a negative easement where the use of the property could be restricted for other parties to use the property in a specific condition.
II - Encroachments:
This encumbrance is a violation of the property rights of a property owner.
When a property owner builds or extends a structure on a neighbor’s land or property, is or she is said to be encroaching on the neighbor’s territory. Encroachment may or may not be intentional.
Unintentional encroachments when the property owner is not aware of his or her property line. A property line is an imaginary line that defines where one person’s property ends, and the neighboring land begins.
If the property survey on the home is invalid, the homeowner may inadvertently encroach on his neighbor’s property.
III - Lease:
A lease agreement is a type of encumbrance in which the owner gives restricted use of the property without giving up the title ownership.
The terms of restricted use are listed in the terms of the lease agreement.
IV - Lien:
A lien is a type of encumbrance in which the tile of the home is affected. In a lien, the creditor has a right by law to seize the property that is kept as collateral if the debt is unpaid.
Once the property is seized by the creditor, they can sell the property and recover the amount of unpaid debt. Common liens are tax liens, mechanical liens, and private liens.
V - Mortgage:
A mortgage is one of the most common types of encumbrance. The bank lends you the money and keeps your property as collateral.
That creates an encumbrance. If you want to sell the loan, you need to pay off the mortgage so that the encumbrance is removed. Until the mortgage is paid off, the homeowner would be unable to sell the property.
Conclusion
In case you find yourself in such kind of distress situation, you may want to find help from one of the real estate attorneys to understand what that encumbrance is all about and how you can get it removed.
When you are purchasing a new property, make sure you know all encumbrances on that property so that you don’t get any surprises later.
