Principles of California Real Estate
Lesson 4:
Encumbrances
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Encumbrances
Encumbrance: Nonpossessory interest in real
property held by someone other than owner.
 Does not give ownership or right to
exclusive possession.
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Encumbrances
Encumbrances are either:
 financial (liens), or
 nonfinancial (easements, private
restrictions, etc.).
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Liens
Security interest
Financial encumbrance (lien) is security
interest in real property.
Security interest: Creditor’s interest that
makes property security (collateral) for
debt.
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Liens
Security interest
If property owner fails to repay debt, secured
creditor may foreclose.
 Property burdened by lien may be sold,
but new owner takes title subject to lien.
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Liens
Voluntary vs. involuntary
Voluntary lien: Property owner voluntarily
grants lien to creditor.
 Examples: mortgage, deed of trust.
Involuntary (statutory) lien: Lien given to
creditor by operation of law, without property
owner’s consent.
 Example: tax lien.
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Liens
General vs. specific
General lien: Lien attaches to all of debtor’s
real property.
 Example: judgment lien.
Specific lien: Lien attaches only to specific
piece of real property, not everything debtor
owns.
 Example: mortgage.
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Liens
Types of liens
Mortgages
 Deeds of trust
 Mechanic’s liens
 Judgment liens
 Attachment liens
 Tax liens
 Special assessment liens

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Types of Liens
Mortgages
Mortgage: Specific, voluntary lien created by
contract between property owner and lender.
 Owner (Borrower) = Mortgagor
 Lender = Mortgagee
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Types of Liens
Deeds of trust
Deed of trust: Serves same purpose as
mortgage but has different foreclosure
procedures.
 Borrower = Trustor or Grantor
 Lender = Beneficiary
 Neutral third party = Trustee
 Trustee handles foreclosure, if
necessary.
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Types of Liens
Mechanic’s liens
Mechanic’s lien: Specific, involuntary lien
attaching to real property undergoing
construction work.
 Can be claimed by anyone providing labor,
materials, or services.
 If owner fails to pay as agreed, lienholder
can foreclose on property.
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Mechanic’s Liens
Preliminary notice
Must give owner, general contractor, and
construction lender (if any) preliminary notice
of right to claim lien within 20 days of starting
to provide services or materials.
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Mechanic’s Liens
Deadlines
Deadlines for filing liens vary depending on
whether owner files:
 notice of completion: must be filed within
10 days after project completed
 notice of cessation: can be filed only after
work has stopped for 30 continuous days
(whether project finished or not)
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Mechanic’s Liens
Deadlines
If owner files notice of completion or cessation,
mechanic’s lien must be filed within 30 days
(60 days for original contractors).
If owner doesn’t file notice, mechanic’s lien
must be filed within 90 days after work stops.
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Mechanic’s Liens
Foreclosure
Once filed, mechanic’s lien will expire if
lienholder doesn’t start foreclosure
proceedings within 90 days.
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Types of Liens
Judgment liens
Judgment lien: Involuntary, general lien that
results from financial judgment against losing
party in a lawsuit (the judgment debtor).
 Attaches to judgment debtor’s property.
 If judgment is not paid, court may order
debtor’s property sold to satisfy judgment.
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Types of Liens
Judgment liens
A judgment lien:
 attaches to property owned by judgment
debtor in any county where abstract of
judgment is filed
 can also attach to new property
acquired by debtor
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Types of Liens
Attachment liens
Attachment lien: Lien used to prevent
defendant from selling property that could be
subject to future judgment.
 Court issues writ of attachment.
 When writ is recorded in county where
property is located, it creates involuntary,
specific lien.
 Valid for three years.
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Attachment Liens
Lis pendens
Lis pendens: Legal document recorded by
plaintiff, notifying anyone who purchases
specified property about pending lawsuit that
may affect title.
 Just provides notice; doesn’t create lien.
 If property is sold, new owner is bound by
any resulting judgment.
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Types of Liens
Property tax liens
Property tax lien: Involuntary, specific lien
created by general real estate taxes.
 Attaches only to property being taxed.
 Government can foreclose and collect
unpaid taxes from foreclosure sale
proceeds.
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Types of Liens
Special assessment liens
Special assessment lien: Involuntary,
specific lien based on levy, to pay for
specific improvements such as street
paving or sewer lines.
 Only attaches to properties subject to
special assessment (because they
benefit from project).
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Types of Liens
IRS liens
IRS lien: Involuntary, general lien that
attaches to all property belonging to
taxpayer who has failed to pay federal
income taxes.
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Summary
Basic Definitions
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Encumbrance
Lien
Mortgage
Deed of trust
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Mechanic’s lien
Judgment lien
Attachment lien
Tax lien
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Lien Priority
Lien priority: Determines order in which
lienholders will be paid, in foreclosures with
multiple lienholders.
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Lien Priority
Foreclosure sale proceeds are paid to each
lienholder in order of priority.
 Any surplus goes to foreclosed property
owner.
 If proceeds aren’t enough to pay off all
liens, lienholders with lowest priority are
not paid.
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Lien Priority
Recording date
Recording date: Date lien was filed in
county’s public records office.
Generally determines lien priority except for:
 tax and assessment liens (always have
highest priority)
 mechanic’s liens (priority based on date
work began)
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Liens
Homestead Law
Homestead law: State law that gives
homeowners limited protection against
foreclosure for judgment and attachment liens.
Does not apply to:
 voluntary liens (mortgages, deeds of trust)
 mechanic’s liens
 liens for child support or spousal
maintenance
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Liens
Homestead Law
Homestead: Owner-occupied dwelling, plus
land and attached buildings.
Homestead protection may be claimed by
filing declaration of homestead in county
office. Or:
 owner (or authorized person) may claim
homestead protection after foreclosure
started
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Liens
Homestead Law
Person can only claim one homestead at a
time.
Homestead protection terminates when:
 owner files declaration of homestead on
different property
 original property is sold
 declaration of abandonment is filed
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Liens
Homestead Law
If homestead owner dies, protection continues
for family members still living on property.
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Homestead Law
Exemption
Homestead exemption: Homestead property
is exempt from judgment liens up to
exemption amount.
 Judgment creditor can’t foreclose
unless property’s net value exceeds
exemption amount.
 Net value = Market value minus amount
of higher-priority liens
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Homestead Law
Exemption
Current exemption amounts:
 $75,000 standard exemption
 $100,000 if debtor is part of family unit
 $175,000 if debtor is:
 over 65
 over 55 and low income, or
 unable to work because of disability
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Summary
Lien Priority and Foreclosure
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Lien priority
Foreclosure
Homestead laws
Exemptions
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Encumbrances
Nonfinancial encumbrances
While liens usually affect owner’s title only
(not use of property), nonfinancial
encumbrances often affect both title and use.
Nonfinancial encumbrances include:
 easements
 private restrictions
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Nonfinancial Encumbrances
Easements
Easement: Right to use someone else’s land
for particular purpose.
 Easement holder may use property in
some specific, limited way, but may not
take possession of property.
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Easements
Types of easements
Two basic types of easements:
 easements appurtenant
 easements in gross
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Types of Easements
Easements appurtenant
Easement appurtenant: Burdens one piece of
land (servient tenement) for benefit of another
piece of land (dominant tenement).
 Owner of dominant tenement is dominant
tenant.
 Owner of servient tenement is
servient tenant.
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Types of Easements
Easements appurtenant
Easement appurtenant runs with the land.
 Continues to exist even if dominant or
servient tenement is sold.
 The benefit and burden are automatically
passed on to all subsequent owners.
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Types of Easements
Ingress and egress
Ingress/Egress: Easement in which
dominant tenant has right to drive over
part of servient tenant’s land in order to
reach or leave her property.
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Types of Easements
Easements in gross
Easement in gross: Benefits particular person
rather than parcel of land.
 No dominant tenement, only servient
tenement (parcel burdened by
easement).
 Burden of easement in gross runs with
the land.
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Types of Easements
Easements in gross
Easements in gross can be personal or
commercial (such as access rights for utility
company).
 In California, both kinds of easements in
gross are transferable, through
assignment or inheritance.
 Many other states do not allow transfer of
personal easements in gross.
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Summary
Easements
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Easement
Easement appurtenant
Running with the land
Easement in gross
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Easements
Creating easements
Main ways to create easement are:
 express grant
 express reservation
 implication
 prescription
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Creating Easements
Express grant
Express grant: Property owner clearly
grants someone easement on her property.
 May be purchased by person needing
an easement.
 May be created when part of larger
property is sold.
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Creating Easements
Express grant
Express grant must be in writing and signed by
grantor (statute of frauds).
 Exact location of easement need not be
specified in grant.
 Document creating easement should be
recorded (to give notice).
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Creating Easements
Express reservation
Express reservation: Owner selling part of
property may reserve easement against
parcel being sold and to benefit parcel she’s
keeping.
 Easement by express reservation must
be in writing, and document should be
recorded.
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Creating Easements
Implication
Easement by implication: Can be implied
grant or implied reservation; also known as
easement by necessity.
 Example: Part of larger parcel is sold,
but grantor fails to create easement in
deed, leaving one of the lots without
access. This creates an easement by
implication.
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Creating Easements
Implication
Requirements for easement by implication:
 must be reasonably necessary for
enjoyment of dominant tenement
 prior use of the easement should have
been apparent to parties
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Creating Easements
Prescription
Easement by prescription: Easement
established by using another’s property
without permission, similar to adverse
possession.
 Also called prescriptive easement.
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Creating Easements
Prescription
Requirements:
 open and notorious use
 hostile use
 claim of right
 continuous use for at least 5 years
 if property taxes assessed separately on
easement, claimant must pay them during
five-year period.
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Summary
Creating Easements
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Express grant
Express reservation
Implication
Prescription
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Terminating Easements
Easements can be terminated by:
 release
 merger
 failure of purpose
 abandonment
 prescription
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Terminating Easements
Release
Release: Someone with interest in property
gives it up to someone else.
 Easement is terminated if dominant
tenant releases servient tenant,
in writing.
 Usually done through quitclaim deed.
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Terminating Easements
Merger
Merger: When two adjacent properties come
under the same ownership.
 If same party becomes owner of both
dominant and servient property,
easement terminates by merger. (No
need for easement on your own
property.)
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Terminating Easements
Failure of purpose
Since easement is a right to use another’s
property for a particular purpose, if that
purpose ceases to exist the easement
terminates.
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Terminating Easements
Abandonment
Abandonment: Easement holder (dominant
tenant) does something that shows intent to
stop using easement.
 Non-use (alone) generally not sufficient.
 Exception: Prescriptive easement
terminates automatically after 5 years of
non-use.
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Terminating Easements
Prescription
Easement is terminated by prescription if
servient tenant prevents dominant tenant
from using easement for 5 years.
 Example: building brick wall around
property.
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Summary
Terminating Easements
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Release
Merger
Failure of purpose
Abandonment
Prescription
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Nonfinancial Encumbrances
Related concepts
Licenses
 Encroachments
 Nuisances

 Not
classified as encumbrances.
 Not considered interests in real property.
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Related Concepts
Licenses
License: Right to enter and use land
belonging to another person.
 Need not be in writing.
 Temporary.
 Revocable.
 Doesn’t create a property interest.
 Not assignable.
 Doesn’t run with the land.
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Related Concepts
Encroachments
Encroachment: Occurs when physical object
from one property intrudes onto neighboring
property.
 Most encroachments unintentional.
 Considered trespass rather than
encumbrance.
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Related Concepts
Encroachments
Landowner who believes her property is
being encroached upon can sue for an
ejectment.
 Remedy may be removal and/or
damages.
 Statute of limitations: 3 years (for owner
to bring legal action).
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Related Concepts
Nuisances
Nuisance: Activity or condition on a
neighboring property that interferes with
enjoyment of one’s own property.
A private nuisance affects at most a few
properties.
A public nuisance affects a larger community.
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Summary
Related Concepts
• License
• Encroachment
• Nuisance
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Nonfinancial Encumbrances
Private restrictions
Private restrictions limit how owner may use
his own property; also known as deed
restrictions or restrictive covenants.
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Nonfinancial Encumbrances
Private restrictions
If put into writing and recorded, private
restrictions run with land, just like easements.
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Private Restrictions
Illegal or unconstitutional
Private restrictions that violate law, public
policy, or constitutional provisions are not
enforceable.
 Unenforceable restriction in deed does not
make deed void—only restriction is void.
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Private Restrictions
CC&Rs
CC&Rs (covenants, conditions, and
restrictions) are usually imposed by
developer of residential subdivision.
 Recorded, and reference included in
first deed for each lot in subdivision.
 Provides constructive notice to
subsequent lot owners.
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Private Restrictions
CC&Rs
CC&Rs allow homeowners to restrict
neighbor actions that will negatively affect
property values.
 If one owner violates CC&Rs, other
owners can seek enforcement through
courts.
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Private Restrictions
Covenants vs. conditions
Covenant: Legally enforceable promise to do or
not do something.
 Violation can result in injunction or
damages.
Condition: Ownership of property depends on
compliance with restriction.
 Violator may actually forfeit title to property.
(Courts tend to avoid this harsh result.)
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Private Restrictions
Termination of restrictions
Restriction may not be enforceable if:
 owners in subdivision fail to enforce it
against other violators
 character of neighborhood has changed
so much it’s difficult to comply
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Private Restrictions
In conflict with zoning
Private restrictions may be stricter than public
land use controls, such as zoning laws.
 If two restrictions (one public and one
private) both address same issue, more
restrictive one usually applies.
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Summary
Private Restrictions
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Private restrictions
CC&Rs
Covenants
Conditions
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