Washington Real Estate Fundamentals
Lesson 4:
Encumbrances
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Encumbrances
Encumbrance: Nonpossessory interest in real
property, held by someone other than owner.
 Does not give right to exclusive
possession.
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Encumbrances
Financial vs. nonfinancial
Encumbrances are either:
 financial (liens)
 nonfinancial (easements,
private restrictions)
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Liens
Security interest
Lien: Creditor’s interest in debtor’s property.
 Makes property security (collateral) for
debt.
 If property owner fails to repay debt,
secured creditor may foreclose on lien.
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.
 Example: mortgage
Involuntary lien: Created by operation of law,
without property owner’s consent.
 Also called statutory lien.
 Example: tax lien
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Liens
General vs. specific
General lien: Attaches to all of debtor’s real
property.
 Example: judgment lien
Specific lien: Attaches only to a specific
property, not to all property debtor owns.
 Example: mortgage
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Liens
Types of liens
Mortgages
 Deeds of trust
 Construction liens
 Judgment liens
 Attachment liens
 Property tax liens
 Special assessment liens
 IRS liens

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Types of Liens
Mortgages
Mortgage: Voluntary, specific lien created by
contract between property owner and lender.
 Owner (Borrower) = Mortgagor
 Lender = Mortgagee
Borrower gives lender mortgage as security
for repayment of loan.
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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
Construction liens
Construction lien: Lien attaching to property
on which construction work was performed.
 Involuntary, specific lien.
 Can be claimed by anyone providing
labor, materials, or services.
 If owner fails to pay bill, lienholder can
foreclose on property.
Also called mechanic’s lien.
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Construction Liens
Preliminary notice
Claimant who doesn’t have direct contract
with owner (subcontractor) must give owner a
notice of right to claim lien.
(Sometimes called pre-lien notice.)
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Construction Liens
Deadlines
Claim of lien must be recorded within 90 days
after claimant stops working on project.
 If deadline missed, can still sue owner for
payment, but does not have lien.
If foreclosure necessary, lienholder must file
lawsuit within 8 months after claim recorded.
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Types of Liens
Judgment liens
Judgment lien: Lien that results from financial
judgment against losing party in lawsuit
(judgment debtor).

Involuntary, general lien against judgment
debtor’s property.

If judgment not paid, judgment creditor can
foreclose.

Court issues writ of execution.
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Types of Liens
Judgment liens
Judgment lien attaches to all of judgment
debtor’s property in county where lawsuit
occurred.
 Also attaches to property in other
counties if creditor files abstract of
judgment in those counties.
Once established, lien will also attach to any
new property acquired by debtor in county.
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Types of Liens
Attachment liens
Attachment lien: Plaintiff’s lien against
property owned by defendant that may
become subject to future judgment.

Court issues writ of attachment.

Writ recorded so that anyone buying
property takes title subject to plaintiff’s
lien.
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Types of Liens
Lis pendens
Lis pendens: Document recorded by plaintiff to
provide constructive notice about pending
lawsuit that may affect title to specified property.

Just provides notice; doesn’t create lien.

If property sold, new owner bound by any
resulting judgment.
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Types of Liens
Property tax liens
Property tax lien: Lien created by general real
estate taxes.

Taxes levied annually on value of real
property (ad valorem).

Involuntary, specific lien attaches only to
the taxed property.

Government can foreclose and collect
delinquent taxes from sale proceeds.
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Types of Liens
Special assessment liens
Special assessment lien: Lien created by
assessment levied to pay for local
improvements, such as street paving or
sewer lines.
 Involuntary, specific lien.
 Attaches only to properties that benefit
from the improvement.
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Types of Liens
IRS liens
IRS lien: Lien that attaches to all property
owned by taxpayer who has failed to pay
federal income taxes.
 Involuntary, general lien.
Other taxes, such as estate and gift taxes,
can also result in liens.
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Summary
Basic definitions
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Encumbrance
Lien
Voluntary or involuntary lien
General or specific lien
Mortgage or deed of trust
Construction lien
Judgment lien
Attachment lien
Property tax lien
Special assessment lien
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Liens
Lien priority
Lien priority: Determines order in which
lienholders will be paid in the event of
foreclosure on property with multiple
liens.
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Lien Priority
Distribution of sale proceeds
Foreclosure sale proceeds applied to pay
off each lienholder in order of priority.

If proceeds aren’t enough to pay off
all liens, lienholders with lowest
priority not paid.

If all liens paid, any surplus goes to
foreclosed property owner.
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Lien Priority
Determining priority
General rule:
 Priority of lien determined by recording
date (date entered in public record).
Exceptions:
 Property tax and assessment liens:
always have highest priority.
 Construction liens: priority based on date
claimant began work.
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Liens
Homestead law
Homestead law: State law that gives
homeowners limited protection against judgment
lien foreclosure.
Does not apply to:
 voluntary liens (mortgages, deeds of trust)
 construction liens
 child support or spousal maintenance liens
 liens of condo or homeowners association
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Homestead Law
Protects owner-occupied home
Homestead: Owner-occupied dwelling, plus
land and appurtenant buildings.

Homestead protection automatic once
owner occupies property.

Declaration of homestead can be
recorded to claim protection in advance.
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Homestead Law
Exemption amount
Homestead protection exempts $125,000 of
homeowner’s equity from foreclosure.
 Judgment creditor can’t foreclose
unless property’s net value (market value
minus higher-priority liens) exceeds
exemption amount.
 In foreclosure, exemption amount set
aside for homeowner before judgment
creditors paid.
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Homestead Law
Sale of home
Homestead law also protects sale proceeds
from creditors’ claims, up to exemption
amount.
 One-year grace period for using exempt
funds to buy new home.
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Homestead Law
Termination of homestead
Homestead terminates when:
 homestead property sold, or
 owner files declaration of homestead on
different property.
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Summary
Lien Priority and Homestead Law
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Lien priority
Surplus
Homestead property
Homestead exemption
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Encumbrances
Nonfinancial encumbrances
Nonfinancial encumbrances include:
 easements
 profits
 private restrictions
In contrast to liens, nonfinancial
encumbrances affect not only title but also
use of property.
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Nonfinancial Encumbrances
Easements
Easement: Right to use someone else’s land
for particular purpose.
Easement holder:
 has right to use property in specific,
limited way
 does not have right to take possession
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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 for benefit of another piece of land.

Burdened land = servient tenement
 Owner = servient tenant

Benefited land = dominant tenement
 Owner = dominant tenant
Example: easement for ingress and egress
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Easements Appurtenant
Running with the land
Easement appurtenant runs with the land.

Appurtenant to dominant tenement.

Continues to exist even if:
 dominant tenement sold
 servient tenement sold

Benefit or burden automatically passed on
to all subsequent owners.
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Types of Easements
Easements in gross
Easement in gross: Benefits particular person
or entity rather than parcel of land.
No dominant tenement, only servient
tenement.
 Generally ends with death of dominant
tenant (easement holder).

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Easements in Gross
Assignment
General rule:
 Benefit of easement in gross is personal
right, can’t be assigned to someone else.
Exception to rule:
 Commercial easement in gross can be
assigned from one entity to another.
 Example: easement to install and
maintain utility lines
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Summary
Easements
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Nonfinancial encumbrance
Easement
Easement appurtenant
Dominant tenement and tenant
Servient tenement and tenant
Running with the land
Easement in gross
Commercial easement in gross
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Easements
Creating easements
Easements may be created by:
 express grant
 express reservation
 implication
 prescription
 dedication
 condemnation
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Creating Easements
Express grant
Easement by express grant: Property owner
may expressly grant someone an easement
on her land.
 Grant must be in writing and signed.
 Document should be recorded.
Easement often created by express grant in
deed when part of larger property sold.
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Creating Easements
Express reservation
Easement by express reservation: Owner
selling part of her property may expressly
reserve easement against parcel she’s
selling, to benefit parcel she’s keeping.
 Must be in writing and signed.
 Should be recorded.
 Reservation ordinarily made in deed.
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Creating Easements
Implication
Easement by implication: If part of larger
parcel sold, but grantor neglected to create
easement in deed, court may hold easement
exists if:
 reasonably necessary for enjoyment of
dominant tenement
 apparent prior use of easement
Also called implied easement or, if no
apparent prior use, easement by necessity.
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Creating Easements
Prescription
Easement by prescription: Created by using
someone else’s property without permission.

Use must be:
 open and notorious, and hostile
 reasonably continuous for 10 years

For easement (as opposed to title), use
need not be exclusive.
Also called prescriptive easement.
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Creating Easements
Dedication
Easement by dedication: Public acquires
easement rights in private property without
compensating owner.
 Dedication may be express or implied.
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Creating Easements
Condemnation
Easement by condemnation: Government
uses power of eminent domain to obtain
easement.
 Same requirements as for transfer
of title by condemnation:
 public purpose
 just compensation paid to owner
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Summary
Creating Easements
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Express grant
Express reservation
Implication
Prescription
Dedication
Condemnation
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Easements
Terminating easements
Easements can be terminated by:
 release
 merger
 failure of purpose
 abandonment
 prescription
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Terminating Easements
Release
Release: When someone who has an interest
in property gives it up.

Easement terminated if dominant tenant
gives servient tenant written release.
 Usually accomplished with quitclaim
deed.
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Terminating Easements
Merger
Merger: When two adjacent properties come
under same ownership.

If same party becomes owner of both
dominant tenement and servient
tenement, easement terminated by
merger.
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Terminating Easements
Failure of purpose
Easement terminated by failure of purpose if
original purpose of easement no longer exists
or can no longer be served.
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Terminating Easements
Abandonment
Easement considered terminated by
abandonment if easement holder indicates
intent to stop using easement forever.

Nonuse alone generally not sufficient to
indicate abandonment.
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Terminating Easements
Prescription
Easement terminated by prescription if
servient tenant takes action to prevent
dominant tenant from using easement and
prevents use for 10 years.
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Summary
Terminating Easements
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Release
Merger
Failure of purpose
Abandonment
Prescription
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Nonfinancial Encumbrances
Profits
Profit: Right to remove something from
someone else’s land.
 Must be created in writing or by
prescription.
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Nonfinancial Encumbrances
Related concepts
Licenses, encroachments, and nuisances:
 relate to use of someone else’s property
 but are not encumbrances – don’t create
property interest
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Related Concepts
Licenses
License: Permission to enter and use land
owned by another person.
 Need not be in writing.
 Revocable.
 Not assignable.
 Does not run with land.
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Related Concepts
Encroachments
Encroachment: When physical object intrudes
from one property onto neighboring property.

Most encroachments unintentional.

Could be trespass if neighbor’s right of
possession affected.
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Related Concepts
Encroachments
Landowner who believes her property is being
encroached upon can sue for ejectment.

Court may order defendant to remove
encroachment or pay damages.
If landowner ignores encroachment, may ripen
into easement by prescription.
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Related Concepts
Nuisances
Nuisance: Activity on or condition of property
that interferes with neighboring owner’s use
or enjoyment of her property.

Private nuisance: Affects a few people.
 Example: smell of neighbor’s garbage

Public nuisance: Affects neighborhood.
 Example: pollution from factory
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Related Concepts
Nuisances
Property owner affected by private or public
nuisance can sue for:
 injunction to stop nuisance
 compensatory damages
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Related Concepts
Nuisances
Attractive nuisance doctrine: Applies when
property has feature that is dangerous and
attractive to children.

Owner liable for harm resulting from
failure to keep out trespassing children.

Example: unfenced swimming pool
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Summary
Concepts Related to Easements
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Profit
License
Encroachment
Private nuisance
Public nuisance
Attractive nuisance
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Nonfinancial Encumbrances
Private restrictions
Private restrictions: Limit how owner may use
her own property.
 Also known as deed restrictions or
restrictive covenants.

Imposed in deed or by written
agreement.

Run with land if recorded.
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Private Restrictions
Illegal restrictions
Private restriction that violates law or
constitutional provision is unenforceable.
 Example: deed restriction prohibiting sale
of property to nonwhites
 Deed isn’t void, only restriction is void.
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Private Restrictions
CC&Rs
Developers impose a set of restrictions on all
lots in new subdivision. These are recorded.
Called covenants, conditions, and restrictions
(CC&Rs). Also called declaration of restrictions.
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Private Restrictions
CC&Rs
CC&Rs enable homeowners in subdivision to
prevent neighbors from doing things that
could have negative effect on property
values.

If one owner violates CC&Rs, other
owners can seek a court order
(injunction) to stop violation.
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Private Restrictions
Covenant vs. condition
Covenant: Legally enforceable promise.
 Violation can result in injunction or
damages.
Condition: Makes ownership of property
depend on compliance.
 Violation can result in title forfeiture.
Courts interpret restriction as covenant when
possible, to avoid harsh result of forfeiture.
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Private Restrictions
Termination
Restriction may no longer be enforceable if:
 owners in subdivision failed to enforce it
against other violators
 character of neighborhood has changed
dramatically
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Summary
Private Restrictions
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Private restrictions
CC&Rs
Covenant
Condition
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