LIMITATIONS OF REAL PROPERTY OWNERSHIP

LIMITATIONS OF REAL PROPERTY: Real Estate

Encumbrances: Liens, Deed Restriction, Easements,
and Encroachments

An encumbrance is a claim or liability against real estate, held by

someone other than the fee owner of the property that affects the
title to the property, and therefore its value. It does not confer any
possessory interest, and therefore is not an estate, and does not
necessarily prevent the transfer of title. Encumbrances can include
liens against the property, deed restrictions, easements, and
encroachments.
 A lien is a claim against the property which serves as collateral for
a debt. The lien holder has the legal right to go to court to have the
property sold to satisfy the debt, if it is not paid. Unpaid real estate
taxes or mortgage payments can result in a lien against the property.
Anyone who works on the property and is not paid can file a
mechanic’s lien against the property. The liens transfer with the
property, so if they are not paid when the real estate is sold, then the
owner becomes liable for the debts.

Deed restrictions, (aka conditions, covenants, and

restrictions, or CC&Rs) are private agreements that restrict the use
of the real estate in some way, and are listed in the deed – hence the
name. The seller may add a restriction to the title of the property.
Often, developers restrict the parcels of property in a development to
maintain a certain amount of uniformity.
Easements

DOMINANT ESTATE – the one that passes thru the property. The one
that benefits.
SERVIENT ESTATE – the property where easement is created.

An easement is the right of someone other than a fee owner to

use a particular parcel of land for a particular purpose – most often it is
the right to cross the property.

An appurtenant easement (aka appurtenance) is a right to use

adjoining property that transfers with the land. The parcel of land that
benefits from the easement is the dominant tenement, whereas the
servient tenement is the parcel of land that provides the easement.
The appurtenant easement always transfers with the land unless the
owner of the dominant tenement releases it.
 An easement in gross is an individual interest to use the land – it
benefits a person or an organization, in contrast to an appurtenant
easement, which benefits the land. Often, businesses, such as railways
and phone companies, hold commercial easements in gross so
that they can conduct business. Utility easements, which allow
utilities to ruin electric wires or pipelines across properties, are also
easements in gross.

Commercial easements in gross can be assigned or conveyed.

Generally, a personal easement in gross is used to allow a neighbor to
cross someone else’s land, but unlike an appurtenant easement, does
not transfer with the property and ends when the owner of the
easement dies.
The Creation of Easements

Easements are created by either express agreement or by

implication. In many cases, an owner creates an easement for himself
when selling a parcel of his land or gives an easement to a buyer of the
property to pass over his land because of convenience or necessity.

One of the rights of owning land is to be able to enter or leave it,

but some parcels of land are isolated from public thoroughfares by
other private properties. In these cases, an appurtenant easement is
created by a court order as an easement by necessity because the
dominant tenement owner has no other way of entering his property.

Sometimes the easement is created by implication, such as through

long-time use or by prescription.
The Creation of Easements

An easement by prescription is created long-term use, where the

owner know about the easement, but did not prevent its use. The
length of time required is usually set by state law, typically 10 to 21
years, and the use must have been continual and without the owner’s
approval, but with the owner’s knowledge. The required time period to
establish the easement by prescription can be accomplished though
tacking, where successive owners- successors in interest- of the
dominant tenement continue to use that easement continually.
An easement by condemnation is created by eminent domain-
owners of the servient tenement must , however, be compensated for
providing the easement.
The Creation of Easements

An party easement is created by written agreement between

parties concerning a common boundary, such as a shared party wall, a
fence, or a driveway, especially between adjacent townhouses or row
houses.

The Termination of Easement

An easement can be terminated in numerous ways, especially when

the reason for the easement no longer exists, or it makes no sense,
such as when both dominant and servient tenements are bought by the
same owner termination by merger, or when the use of the
easement changes significantly, for instance, by greatly increased
traffic, or the owner of the dominant tenement releases the easement.
The easement may also terminate if it is abandoned. In some cases,
certain legal actions may be required before the easement is actually
terminated.
Licenses

A license, unlike an easement, is having the permission of the

owner-the licensor-to enter his land for a specific purpose. Unlike an
easement, the license can be rescinded at anytime. A license will also
terminate upon the death of either the lisencee or the licensor, or if the
licensor sells the land.

Hence, although a license is similar to an easement, a license is not

actually an encumbrance on the real estate and does not transfer with
the title.

Encroachments

An encroachment is an extension of some physical structure,

such as a building, driveway, fence, or tree over the property lines from
an adjoining property.
Encroachments can affect the marketing of the title, and should be noted in a
listing agreement or sales contract.

Encroachments can best be determined by a spot survey, which is a survey

showing the locations, sizes, and shapes of the buildings on a lot. Visual
inspection is not as accurate and should not bee relied upon if there is a
question of an encroachment.

The owner of the land subject to the encroachment can either sue for
damages or have the structure extending over the property lines removed or
trimmed back. However, the owner of the encroaching structure may have
an easement by prescription if the time period of the encroachment
exceeds the prescriptive time stipulated by state law for an easement by
prescription.
Trusts

Oftentimes, land is transferred to a trust for the benefits of minors or

incapacitated adults. A trust is a legal advice created when a trustor (aka
grantor), the creator of the trust, transfers assets to the trust to be invested
or handle by a trustee, in whose name the assets are titled, for the benefits of
the beneficiaries. The trustee can be a person but is often a trust company a
corporation that provides the service. The trustee is usually compensated by
fee that is paid from the earnings from the trust. After paying expenses for
running the trust and the trustee’s fee, the remaining income generated
from the assets is usually paid to the beneficiaries.

A trust may exist indefinitely, or may be terminated upon certain

conditions, such as when the beneficiaries reach a certain age, in which
case, the assets of the trust are passed to the beneficiaries. A trust can
be created while the trustor is alive of through the trustor’s will. A living
Trust is created during the trustor’s to continue to control and benefit
From the assets.
 The main purpose of a living trust is to avoid the time and expense of
probate. Upon the death of the trustor, the trust’s the assets can pass directly
to the beneficiaries without the need to have assets distribute through probate
court. A testamentary trust is created by a will.

Land Trusts

A land trust has only land for its asset. The land trust usually last for a
stipulated of time, after which the land is sold and the proceeds are paid to
the beneficiary.
The title to the property is transferred to the trustee usually for the
beneficial interest of the trustor when the trustor also names himself the
beneficiary. The beneficial interest in the land trust is legally classified as
personal property rather than real property, but he beneficiary is still
entitle, to control and to possess it, and is entitle to any income or to
proceeds of its sale.
 The are several benefits to a land trust. Because the dead is in the
trustee’s name, the name of the beneficiary does not appear, so the
beneficiary can maintain secrecy as to actual ownership. The beneficiary’s
benefits can be assigned to someone else without a new deed, and can be
used as collateral for a loan, but without a mortgage being recorded. Because
the beneficiary’s interest is personal, when the beneficiary dies, the assets of
the trust are subject to the laws of the state in which the beneficiary lived,
even if the trust had land in multiply states. This avoid probate costs in those
other states.

Real Estate Ownership by Business Entities

Since corporations are legal persons, they can hold title to real
estate just as a real person. A real estate syndicate is 2 or more people
or business entities that have pooled their money to invest in real estate.
A join venture is similar except that it is created for a specific business
purpose for a definite amount of time.
 These entitles cannot hold title to real estate, except as tenants in
common or joint tenants of the individual members of the syndicate or joint
venture, or as a trust, partnership, or corporation.

Deed of Trust, Reconveyance Deed, and Trustee’s Deed

Since property can be conveyed through a trust, there are 3 different types
of deeds associated with trust, depending on the grantor and grantee. The
trustor is the creator of the trust, the beneficiary is the party benefiting from
the trust, and the trustee is the fiduciary administering the trust for the
trustor.

A deed of trust (aka deed in trust) is a deed that conveys title from a
trustor to the trustee, the benefits of the benefits of the beneficiary.
A deed of trust is often used in lieu of a mortgage, when the borrower, the
trustor, transfers the deed to a trustee as security for the loan given by the
lender.
 A reconveyance deed is a deed conveying title from the trustee back to
the trustor, such as when the trustor pays off the loan that was secured by
the real estate.

A trustee’s deed is a deed conveying title to another party who is not the
trustor. In most cases, this would be the beneficiary. The deed must state that
the deed was executed according to the terms of the trust.