What do liens and easements have in common

Liens and encumbrances are most commonly associated with real estate , but either one may be applied to personal property as well. If an individual fails to pay a debt, then a creditor or tax agency may attach a lien or an encumbrance to the individual's property. Having such a claim against the property creates an unclear title and can limit the ability to sell or otherwise transfer the property.

Any existing encumbrance is required to be disclosed by the owner of the property to potential buyers. A buyer will inherit the encumbrance upon purchasing the property.

If a seller does not disclose existing encumbrances, he is subject to legal action by the buyer for his failure to do so. Real Estate Investing. Loan Basics. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.

At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.

We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Personal Finance Home Ownership. Lien vs. Encumbrance: An Overview A lien represents a monetary claim levied against property to secure payment—the settlement of an obligation from the property owner. Key Takeaways A lien is a monetary claim against property intended to ensure payment. Any lien is an encumbrance, but the reverse is not always true.

One of the most important things that you need to do when you decide to purchase a house is to check for any encumbrances on your potential purchase. An encumbrance refers to any legal right that will interfere with your ownership in some way.

A lien, for instance, might be present on the property to ensure that a creditor gets his payments. If the payments do not go through, then he can seize that property, even though you personally don't owe him money. An easement, on the other hand, involves another individual or even a business having an interest in how part of your property is used. You must know about these in advance as they lower the overall value of your property and may make it harder to sell later.

The term for a whole piece of property without any encumbrances is "fee simple" in most states. But it isn't as easy as checking to see whether the property description says that it isn't passing as fee simple.

You have to look to see whether the property has been divided into parcels, had a creditor take an interest in it, or an interest has been given away through a will or other legal document. In many states, you can request a preliminary title search from the seller without incurring any extra costs. The preliminary title search provides only a general overview, but it should provide you with the basic chain of ownership. You will want to save this for when you go on to conduct your own basic title search.

Remember that the preliminary title search is exactly that: preliminary. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance.

Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.

Measure content performance. Develop and improve products. List of Partners vendors. Real Estate Basics. By James Kimmons. He is a real estate broker and author of multiple books on the topic. Learn about our editorial policies. Updated on May 08,