Colony Title Associates

The Facts About Encumbrances on a Property's Title

What is an encumbrance on a property’s title? And how can you find out if there are any on the property you wish to buy? Why is this important in the process of buying a home? It’s important to know the answers to these questions so you don’t get stuck with a bad home title. Let’s get started!

What is an encumbrance?

To know what an encumbrance is, we must know what a fee simple title is. This is the “maximum and best possible right of ownership of real property.” Encumbrances are anything that detracts from the status of fee simple title.

What are the kinds of encumbrances?

There are two categories of encumbrances: land use encumbrances and financial encumbrances.

Land use encumbrances are things such as zoning ordinances, building restriction lines, subdivision restrictions, rights of way, easements, etc., that may affect the way the owner of the title can use the property. For example, the building restriction line prohibits the owner of the title from building a structure on the property past the point of the line. It’s common for at least one of these encumbrances to be present on the home’s title, but property owners accept this as they are a necessary part of owning real estate.

Financial encumbrances are things such as unpaid mortgages, liens or judgments against the property, unpaid taxes, etc. Essentially, any outstanding financial obligation which the owner or previous owner has not paid. Records of these kinds of encumbrances are kept on file in local land records.

Why do I need to know about encumbrances on a property’s title?

There are several reasons it’s important to be aware of encumbrances on a property’s title before you purchase it. With regard to land use encumbrances, it’s important to know how you can and cannot use the land on the property so you don’t violate any local regulations. In addition, if any land use regulations are currently in violation and you purchase the property, these violations become your responsibility, which you don’t want.

Financial encumbrances too become your responsibility if you purchase the property before they are taken care of. This means any party who is owed money by the previous owner of the property can now come after you. Filing errors, forgery, fraud, and other discrepancies at the land records office can also result in the discovery of encumbrances for which you will be held responsible as the current owner of the property.

How can I discover and protect myself from encumbrances?

The best way to discover encumbrances on a property’s title is to enlist the help of a title insurance company. The company will do a thorough search of local land records to find any encumbrances on the title, and will research any land use encumbrances that may exist. This way, you can decide whether or not you want to move forward with the purchase.

If you do decide to move forward with the purchase, it’s important to protect yourself from encumbrances that may be discovered as a result of past fraud, filing errors, etc. This is what title insurance is for. Title insurance protects you from claims on your property’s title due to encumbrances that could surface at any time. For more information about home title insurance in the Delmarva area, contact Colony Title Associates today.

About Colony Title Associates:

Founded in 1995, Colony Title Group handles in excess of 2000 real estate closings in Washington DC and the Delmarva area every year. The founder Tee Tillman has over 23 years experience in the title and real estate law fields. Colony handles closings for several lenders, including banks, credit unions and mortgage brokers. Colony is the preferred choice for many real estate brokers in the Baltimore area. If you have any questions concerning issues that Baltimore title insurance protects you from, feel free to contact us at 410 884-1160 or visit ColonyTitle.com today!

Sources

http://www.ctrealtor.com/unprotected/HtfdCourant_WhatIsThisThingCalledMarketableTitle.pdf

http://smallbusiness.chron.com/difference-between-clear-marketable-title-20408.html