Encumbrances in real estate business

Encumbrances in real estate business

Encumbrances in real estate business

Nowadays many homeowners and brokers are involved in real estate selling and buying as it is a very lucrative business. But like many other businesses, it also has some encumbrances. Before investing in real estate business you should be aware of the encumbrances involved in it.

Encumbrances in real estate

Most encumbrances in real estate selling and buying are mainly of two types, namely limitations (like restrictions and covenants) and liens (like mortgage). The various types of encumbrances are:

Deed restrictions: These are also known as covenants or conditions. Deed restrictions impose a limitation on how a property should be used or what type of structures can be built on the property. These are generally placed by builders and developers in order to control the usage of the property and maintain the standard of construction. The conditions in the deed restriction are generally imposed by the seller (grantor) and are handed down to the buyer (grantee). The conditions will be according to the seller's imagination, for example, you can put restriction on the maximum number of cars parked in front of your property or to keep the lawn cut and leaves raked, etc. If a restriction is very tight it will have a negative effect in attracting prospective buyers. So, you should be aware of any deed restriction before purchasing a property. If you're selling a property, make sure that the buyer is aware of the conditions of the deed restriction.

Easements: It is the right to use someone's real estate, without having ownership interest. There are two main types of easements. These are:

Appurtenant easement: If the properties of two different owners are adjacent to each other, then, with the help of this easement both of them can use each other's property. Say, if there is no driveway to the main road from your house, you can take help of this easement and use the driveway of your neighbor.

Easements in gross: This is a type of utility easement where the right of cable line or gas line or electric wire is given to place it on, over or under a property. This right can be transferred or sold.

Liens: It is an interest in property which is acts as collateral against the loan taken by the property owner. Though it is not an ownership interest, the owner has the right to foreclose in case of nonpayment of the loan. A lien can be due to unpaid taxes or by court judgments. So, before buying the property, you have to make sure that all the liens are released at the time of purchase. If a house is in mortgage lien in the name of the seller, then you have to make sure that he clears the lien from the money he gets from selling the house.

License: It is the right given to you to utilize someone else's property and this right can be terminated anytime.

Encroachment: If there is any extension of some structure like a fence, a building, a tree over the property boundary line from an adjacent property it is called encroachment. It can create problem in transferring the title of the property. If you're purchasing a house, you can have a spot survey to detect any encroachment.

While dealing with the real estate selling or buying, you have to make sure that the seller clears all the encumbrances from the money he gets from selling his property. When you are selling a property, it is mandatory for you to disclose all the encumbrances to the buyer.

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