When purchasing a home, it is essential to understand the various factors that can affect a property’s title. Invisible limitations, such as easements, restrictions, and encumbrances are common elements that can impact the ownership and use of real estate. In addition to affecting how owners can use their property, many homeowners and homebuyers are quick to overlook the implications of these instruments. In this article, we will explore what Buyers and Sellers need to know about the title implications of easements, restrictions, and encumbrances.
What are Easements, Restrictions, and Encumbrances?
- Easement: An easement is a legal right that allows someone else to use a portion of your property for a specific purpose. This could include granting access to a neighboring property owner, allowing utility companies to install and maintain equipment, or providing ingress and egress to a public road.
- Restrictions: Restrictions, often found in homeowner association (HOA) agreements or subdivision covenants, dictate how a property can be used or developed. These restrictions may include limitations on building height, architectural style (paint colors, roof colors or types, trees and garden requirements, window and door styles), or the types of activities permitted on the property.
- Encumbrances: An encumbrance is any claim, lien, or restriction that affects the title to a property. This could include unpaid property taxes, solar panel liens, outstanding mortgages, or judgments against the property owner.
Why Using a Knowledgeable Closing Agent is Key:
During the closing process, a title examination is conducted to determine the ownership history of the property and identify any easements, restrictions, or encumbrances that may affect title. It is essential to thoroughly review the title report to understand the implications these factors have on the property’s use and value. A good closing agent will outline the findings of a title search report and provide supporting documentation to explain the impact of the findings. Buyers and sellers should follow up with their closing agent to ask any questions and seek clarification where needed, to ensure there are no post-closing surprises.
If easements and restrictions are found, copies of the recorded documents should be provided to all parties for review. Easements and restrictions can significantly impact how a property can be used or developed and should never be overlooked. For example, an easement for utility lines may limit where you can build structures on your property, such as a pool or shed, while restrictions imposed by an HOA may dictate the appearance of your home, restrict design ideas, and even certain activities.
For encumbrances, closing agents should begin obtaining the necessary release documents as soon as is reasonable, to ensure any financial obligations are paid off at the time of closing and do not transfer to the new owners. Encumbrances such as unpaid taxes and solar panel liens attach directly to the property rather than to the owner, so extra care and precautions should be taken to ensure they are fully paid off and the necessary release documents are recorded, proving that title is free and clear of any outstanding debts.
Understanding the title implications of easements, restrictions, and encumbrances is essential for all parties involved in real estate transactions. Whether you are buying or selling a property, it is crucial to be aware of any factors that may affect the property’s ownership, use, or value. By working with experienced professionals and carefully reviewing the title report, buyers and sellers can navigate the closing process with confidence and peace of mind. Whether you are buying or selling a home, or are concerned that the prior owner’s financial obligations may not have been properly paid off at the time of your closing, the attorneys at Lacey Lyons Rezanka can help. Call our office for more information or to schedule a consultation!