Encumbrances

Encumbrances ## What Is an Encumbrance? An encumbrance is any claim, lien, charge, or liability attached to a piece of real property that affects its title or limits its use. The key word is *affects* — an encumbrance does not prevent ownership, but it does burden the property in some way. Encumbrances run with the land, meaning they transfer to the new owner when the property is sold unless they are specifically cleared. California real estate practice involves a broad range of encumbrances, from mortgage liens to deed restrictions to physical intrusions. Understanding which type of encumbrance is present — and whether it affects title or use — is essential for real estate licensees. Encumbrances fall into two major categories: 1. Financial encumbrances (liens) — affect title and create a monetary claim against the property 2. Non-financial encumbrances — affect use or physical possession without creating a monetary claim --- ## Financial Encumbrances — Liens A lien is a financial claim against a property that serves as security for a debt. If the debt is not paid, the lienholder can potentially force a sale to satisfy the obligation. ### Mortgage / Deed of Trust In California, real estate loans are almost always secured by a deed of trust, not a mortgage. The distinction: - A mortgage involves two parties (borrower and lender) - A deed of trust involves three parties: the trustor (borrower), beneficiary (lender), and trustee (neutral third party holding title as security) Under a deed of trust, if the borrower defaults, the trustee can conduct a non-judicial foreclosure (trustee's sale) without going through the courts — a major practical difference from mortgage states. California's deed of trust…