Encumbrances & Liens

Question 1

Encumbrances

Answer 1

• non-possessory interests limiting legal owner’s rights
• does not include possession

Question 2

Two types of encumbrance?

Answer 2

• encumbrances that affect use
• encumbrances that affect ownership, value, transfer

Question 3

Encumbrance affecting use include?

Answer 3

easements, encroachments, licenses, deed restrictions

Question 4

Encumbrances affecting ownership, value, transfer include?

Answer 4

liens, deed conditions

Question 5

Easements - Characteristics

Answer 5

• rights to use portions of another’s property
• affirmative easement: allows a use
• negative easement: prohibits a use

Question 6

Affirmative easement allows?

Answer 6

use of another’s property

Question 7

Negative easement prohibits?

Answer 7

use of another’s property

Question 8

Easements - Appurtenant

Answer 8

• attaches to the estate
• dominant tenement’s right to use or restrict adjacent servient tenement
• by necessity, to landlocked owners
• party wall easement in a shared structure: to not damage or destroy

Question 9

A party wall easement in a shared structure is?

Answer 9

to not damage or destroy

Question 10

Easements - In Gross

Answer 10

• does not attach to the estate
• personal – not transferrable, ends upon death of easement holder
• commercial – transferrable, granted to a business

Question 11

Easements - By Prescription

Answer 11

• property used without permission; can come to exist regardless of owner’s consent
• obtainable through continuous, open, adverse use over a period of time which varies by state

Question 12

Easements - License

Answer 12

• personal right to use a property
• does not attach
• non-transferrable
• revocable
• ceases upon death of owner

Question 13

Encroachments

Answer 13

• unauthorized intrusion of one’s owner’s real property onto another’s
• may require survey to detect
• may become prescriptive easements if not remedied over prescription period

Question 14

Deed Restrictions

Answer 14

• conditions, covenants imposed on property by deed or subdivision plat
• goes with the property upon transfer
• established to control quality, standards of a subdivision
• apply to land use, type of structure, setbacks, minimum house size, etc.

Question 15

Deed Convenants

Answer 15

-created by mutual agreement
- enforceable by injunction

Question 16

Liens

Answer 16

• claims attaching to real and personal property as security for debt
• recorded on title effectively reducing equity in the amount of the lien
• does not convey ownership unless a mortgage in a title theory state
• lien attaches to the property
• property can be encumbered by multiple liens
• lien termination upon payment, recording satisfaction

Question 17

Voluntary / Involuntary

Answer 17

mortgage lien / tax lien

Question 18

General / Specific

Answer 18

against any & all assets / against car or house

Question 19

Superior / Junior

Answer 19

paid before juniors / paid after superiors by date of recording

Question 20

Lien Priority

Answer 20

• order in which liens against a property are satisfied
• determined by superior v junior class and by date of recordation
• the highest priority lien is paid by foreclosure proceeds before any other lien

Question 21

Superior Liens by rank ( not by date of recordation; paid before junior liens)

Answer 21

• real estate tax liens
• special assessment liens
• federal estate tax liens
• state inheritance tax liens

Question 22

Junior Liens ( by date of recording) including

Answer 22

• federal income tax liens
• judgment liens
• mortgage liens
• vendors’ liens
• mechanics’ liens (priority by date work performed)

Question 23

Foreclosure

Answer 23

liquidation or transfer of collateral property by judicial, non-judicial, or strict foreclosure

Question 24

Mortgage Lien Foreclosure

Answer 24

liquidation of collateral property by judicial, non-judicial, or strict foreclosure

Question 25

Judicial Foreclosure

Answer 25

- lawsuit by creditor followed by court-ordered public sale to enforce lien; may entail deficiency judgments, redemption rights

Question 26

Deficiency Judgment

Answer 26

judgment by court on borrower to forfeit other property to pay off any shortfall from foreclosure

Question 27

Redemption Right

Answer 27

borrower's right to reclaim property before or after foreclosure sale

Question 28

Non-judicial Foreclosure

Answer 28

"power of sale" granted to lender; no suit; no deficiency

Question 29

Strict Foreclosure

Answer 29

court orders legal transfer of title directly to lender without public sale

Question 30

Deed in Lieu of Foreclosure

Answer 30

"power of sale" granted to lender; no suit; no deficiency judgment; no redemption period after sale

Question 31

Lien Theory State

Answer 31

lender of mortgaged property holds equitable title rather than legal title; borrower holds legal title

Question 32

Title Theory State

Answer 32

lender holds legal title to the mortgaged property until the mortgagor satisfies the terms and obligations of the loan