Private Restrictions on Property Ownership

09/16/2012

Encumbrances are restrictions and limitations on ownership rights. There are several forms of private encumbrances which can either enhance the value of the property or in some cases completely devalue the land to a potential buyer.

Covenants, conditions, and restrictions, collectively known as CC&R’s, are private restrictions that limit the way a property owner utilizes their property. In common practice, CC&R’s are in essence promises or agreements concerning the land. CC&R’s are normally found in the deed accompanying the property and have the legal effect of a binding contract term on all future owners—they run with the land. The majority of planned developments utilize these restrictions for the benefit of all residents. Not surprisingly, areas with properly outlined covenants tend to retain property value better than those with no restrictions. Developments that adequately enforce their covenants and standards are usually safer, look nicer, and better retain and increase investments and improvements that owners have made to the properties. It is important for property buyers to read and understand all CC&R’s associated with the land. Existing CC&R’s may prevent them from doing simple things such as putting a sign up in the front yard, or building a new fence. As mentioned earlier, CC&R’s are binding to the buyer and are enforceable whether or not they have been reviewed.

Liens are another type of private encumbrance on ownership. A lien is a claim on property as security for a debt or fulfilment of some monetary charge or obligation. When a lien is placed on a property, the property owner is limited in what they can do with it. These restrictions can be either voluntary or involuntary. Liens places on the property by the owner are voluntary and typically come in mortgage form to secure payment of some long-term debt. Involuntary liens are used to protect the interests of those who have valid claims against the owner of the property. Mortgage liens and mechanics’ liens are two types of specific liens that are used to secure debts associate with a specific portion of property. Mortgage liens are the most common private encumbrance on ownership and are used to protect lenders by pledging property as collateral for the debt. Mechanics’ liens are used by engineers, suppliers, architects, and those who provide services and materials for property improvements. If any such workers are unpaid by the property owner, they can file a lien on the property and foreclosure proceedings may result. General liens are placed on all of the property that might be owned by a person. They do not represent property ownership but do serve as claims against an owner’s title.

Easements are rights given to one party by a property owner to utilize the land in a certain way. Essentially, the owner coexists with the holder of the easement rather than giving up and portion of the land. Two types of easements exist: easement Appurtenant and easement in gross. Easement appurtenant occurs when an easement is legally connected to an adjoining property and usually runs with the land. For example, party A pays party B to grant an easement to build a road across their land. Party A is the dominant estate—it benefits from the easement. Party B on the other hand is being burdened by the easement and is known as the servient estate. The owner of the servient estate cannot do anything to interfere with the dominant estate’s access to the road. An easement in gross only has a servient estate. A sewage company that obtains an easement to run a sewage line across a property is an example of an easement in gross. The easement is granted to the company rather than portions of land. A new type of easement that has been erected is the conservation easement. Unlike other easements, this is a type of negative easement that prevents the property owner from using the land in a certain manner. They are typically intended to protect land from future development. A profit a prendre is similar to an easement, but it specifically permits the holder to remove certain natural resources from the servient property. 

For more on conservation easements, visit http://www.nature.org/aboutus/privatelandsconservation/conservationeasements/index.htm and view the video below.