How To Deal With An Encumbrance Of A Property
One of the more potentially annoying issues you may have to handle when buying, selling, or transferring real estate is what the law calls an encumbrance. In theory, this covers anything that serves as a potential negative for the acquiring party in the process. Typical encumbrances include things like unpaid mortgages, unclear titles, liens, easements, and court orders. Here is a look at what a real estate law firm might try to do while handling an encumbrance on behalf of a client.
Assessing the Whole Situation
Given there may be multiple encumbrances involving a property, it's wise to get a fuller sense of what's going on. An attorney will typically order a title search to learn about any oddities with a property's title so the client can make fully informed decisions.
If you're acquiring property, you should also ask the folks who currently own it about what representations they can make and how much liability they're willing to accept. Although this won't protect you from misrepresentations, it might provide the basis for legal action down the road if an encumbrance proves to be problematic.
Sellers should also note this is why complete disclosures are critical because they can be accused of fraud in these scenarios if they don't come clean. When in doubt, disclose anything you think might even potentially have a hint of encumbrance.
Seek Arrangements
Another tool is to simply ask specific parties to the encumbrance if they can accommodate you. For example, a bank may be perfectly comfortable with you taking over a mortgage. A neighbor who has a permanent easement might no longer use it and be happy to give it up in exchange for a small amount of compensation. Even government entities dealing with things like pending sheriff's sales may call them off if they're assured you'll be a faithful taxpayer on a property that has cost them money.
Go to Court
When asking politely doesn't work, there is that most American of solutions: petitioning the court for relief. Suppose a property is encumbered because there is an old lien against it. Under some circumstances, such as the lien holder failing to act for decades, you may be able to ask the court to cure the title.
This means a judge would review the case. If your argument that lien has never been meaningfully exercised holds water, the judge may lift the lien and give you a clear title for the property. Remember, governments don't like properties going fallow.