. . . Real Estate Law Lecture Notes: Encumbrances . . . . ..
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Lecture
Notes: Encumbrances
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Private
Encumbrances
Liens:
A lien is a right to have a debt paid out of the sale of real estate. There
are several kinds of liens:
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Judgment
lien: When a person is successful sued by a plaintiff, the amount
of the unpaid judgment, which is a public record, is a lien on the real
estate owned by the judgment debtor. When the judgment debtor pays the
judgment there should be placed of record a notice that the judgment has
been satisfied. The lienholder may foreclose on the lien, in which case
the sheriff will sell the property and all security claims including the
lien will be paid out of the sales price. Or the lienholder can wait until
the judgment debtor sells the property, at which time the purchaser will
pay off the lien out of the purchase price.
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Lis
pendens: Depending on the state, a pending but not final lawsuit may
operate as a lien on the transfer of the real estate owned by the defendant
in the lawsuit. The lien lasts until the lawsuit is ended, at which time
if the defendant wins, the lien goes away, or if the defendant loses,
the lien is replaced with a judgment lien. In most states, the plaintiff
must move for an order to get lis pendens and the judge will grant the
order if there is the possibility that the defendant might put property
out of reach of the plaintiff by the time the suit is ended. Some states
make a pending lawsuit lis pendens.
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Mechanics
and Materialmen's liens: These are liens on real estate by workmen
who have worked on the property to repair or improve the property. In
a sense, their labor is "in there." Many states will permit
a mechanics lien on automobiles. And some states have a similar device
for attorneys who can keep their client's documents until a bill is paid.
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Mortgages
and trust deeds: These encumbrances give a lender the right to have
a debt paid out of the sale of the real estate, either at closing if
the sale if voluntary, or at a foreclosure sale for the purpose. Mortgages,
trust deeds, and security deeds are created with the express consent
of the property owner, unlike liens, which are created by the law for
certain circumstances
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Restrictive
covenants: These are restrictions contained
in a development document, and may be contained directly in the deeds or
in public documents recorded at the courthouse. Each property owner owes
all similarly situated property owners the obligations and restrictions
contained in the covenants. (They are covenants and not contracts, because
the obligations are continuing.) Each owner subject to the covenants may
enforce the covenants against all other owners, even if they "came
late" to the development, provided they bought with notice and reliance.
Frequently the covenants create architectural review committees that can
rule on proposed landscaping, color, and siting. The covenants may be enforced
by injunction or damages. There are still some deeds containing restrictive
covenants preventing sale of the property based on race or religion. These
are unconstitutional restrictions are just ignored - the law won't enforce
them.
