1. Washington Real Estate Fundamentals
Lesson 4:
Encumbrances
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2. Encumbrances
Encumbrance: Nonpossessory interest in real property, held by someone other than owner. 
Does not give right to exclusive possession.
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3. Encumbrances Financial vs. nonfinancial
Encumbrances are either:
financial (liens)
nonfinancial (easements, private restrictions)
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4. 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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5. 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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6. 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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7. 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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8. 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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9. 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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10. 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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11. 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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12. 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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13. 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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14. 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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15. 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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16. 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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17. 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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18. 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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19. 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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20. Summary Basic definitions
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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21. 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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22. 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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23. 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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24. 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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25. 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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26. 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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27. 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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28. Homestead Law Termination of homestead
Homestead terminates when:
homestead property sold, or
owner files declaration of homestead on different property.
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29. Summary Lien Priority and Homestead Law
Surplus
Homestead property
Homestead exemption
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30. 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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31. 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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32. Easements Types of easements
Two basic types of easements:
easements appurtenant
easements in gross
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33. 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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34. 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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35. 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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36. 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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37. Summary Easements 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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38. Easements Creating easements
Easements may be created by:
express grant
express reservation
implication
prescription
dedication
condemnation
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39. 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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40. 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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41. 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 easement by necessity.
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42. 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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43. 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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44. 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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45. Summary Creating Easements
Express grant
Express reservation
Implication
Prescription
Dedication
Condemnation
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46. Easements Terminating easements
Easements can be terminated by:
release
merger
failure of purpose
abandonment
prescription
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47. 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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48. 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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49. 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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50. 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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51. 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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52. Summary Terminating Easements
Release
Merger
Failure of purpose
Abandonment
Prescription
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53. 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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54. 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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55. 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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56. 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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57. 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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58. 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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59. Related Concepts Nuisances
Property owner affected by private or public nuisance can sue for:
injunction to stop nuisance
compensatory damages
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60. 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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61. Summary Concepts Related to Easements
Profit
License
Encroachment
Private nuisance
Public nuisance
Attractive nuisance
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62. 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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63. 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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64. 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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65. 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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66. 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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67. 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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68. Summary Private Restrictions
CC&Rs
Covenant
Condition
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