Before you buy, here’s what you need to know about encumbrances


By ,
Ask a Lender
December 12, 2017


Home-encumbrances-man-measuring-a-fence-he-is-building

Key Points

Types of encumbrances

  • Easements: Give someone the right to your property, such as sharing a driveway.
  • Encroachments: Infringe on someone’s property, such as a fence over the property line.
  • Liens: Can be voluntary, such as a mortgage, or involuntary, such as a tax lien.

When purchasing real estate, it’s important to understand encumbrances — claims to a property that can include easements, liens and encroachments. Though it’s normal for properties to have encumbrances, they can affect how you’re allowed to use the property, and could open you up to legal disputes. By knowing what encumbrances are, and how to find out if a property has any, you can make the homebuying process easier.

An encumbrance is a claim on the use of a property by someone who does not own the property. Encumbrances can restrict the use of a property as long as it is in effect, which is why it’s a good idea to know about any encumbrances affecting a property before you buy it. Encumbrances take many forms. Three of the most common are easements, encroachments and liens.

Easements

Easements give a third party the right to use a portion of your property. Most commonly, easements give utility companies access to your property to work on power lines or phone cables. Easements may also allow your neighbors to use some of your property, such as if you share a driveway.

It’s important to know about any easements before purchasing a property, because it could affect how others are allowed to use your property in the future. For example, a neighbor may have the right to drive their car over your property thanks to an easement. A property survey can alert you to the presence of such easements ahead of time so you’re not surprised.

Encroachments

Encroachments occur when someone builds a structure on someone else’s property, either intentionally, or because they are not aware of the property boundaries. For example, if a neighbor’s fence crosses the property line onto your property, the property-right violation would be considered an encroachment.

Often, disputes about encroachments can be resolved by both parties talking the matter over. But sometimes such disputes need to be taken to court to be settled in a court of law. When purchasing a house, knowing about such encroachments ahead of time can be a lifesaver. You may be able to request that the seller remedy the encroachment as a condition of the sale, preventing headaches once you take control of the property.

Understanding the property boundaries can also help you avoid encroaching on your neighbor’s property once you buy the house. For example, if you purchase a house with the intention of putting a pool in the backyard, you may discover that the actual property boundaries and setback requirements wouldn’t allow you to put in a pool. That’s information that’s better to know before you purchase a property, not after.

Additionally, if the previous owner made any improvements that encroached on a neighbor’s property, as the new owner, you’ll be responsible for correcting the encroachment.

Liens

Liens are a legal claim to a property that are used to guarantee payment of a debt. Liens can be voluntary, such as a mortgage, or involuntary, such as a tax lien resulting from failure to pay property taxes.

If a home seller has a tax lien on their property, the IRS requires the seller to pay it off before the new owner can take possession. Typically, the seller pays off voluntary liens with the proceeds of the sale. But involuntary liens can complicate home sales. Knowing about such liens ahead of time can save you a headache — it may mean it’s time to move on to the next house.

To find out if a property has liens on it, you can either do a title search yourself, or use a Title company to do a search for you.


Compare Mortgage Lenders