Legal Memorandum on Property Law Senerio

PRIVATE ENCUMBRANCES

Private encumbrances are voluntarily created by private parties who deal with the real property and consist of judgment liens, mechanic’s and materialmen’s liens, mortgages and trust deeds, easements, and restrictive covenants. Judgment Liens A lien is created when the property owner has been sued for a sum of money and a court has entered a judgment against the property owner. For example, a property owner is involved in an automobile accident. The property owner is sued for negligence and a $50,000 judgment is assessed against him by a court of law.

Judgment liens do not become liens on real property until they have been recorded in a special book, called the Judgment Book or General Execution Docket, in the county where the real property is located.

A judgment lien remains a lien on real property until it has been paid or expires by passage of time. Most states have laws that limit the duration of a judgment lien. These laws provide that a judgment lien, if not paid, will expire within 7 to 14 years after becoming a lien on real property. Judgments attach at the time of recordation to all property then owned by the judgment debtor or to any property thereafter acquired by the judgment debtor. Judgments are potential title problems and can be discovered during a title examination.

Mechanic’s and Materialmen’s Liens

A mechanic’s or materialmen’s lien is imposed by law on real property to secure payment for work performed or materials furnished for the construction, repair, or alteration of improvements on the real property. Each state has its own laws for the creation of these liens.

Claimants under most mechanic’s or materialmen’s lien statutes include contractors, laborers, subcontractors, material suppliers, lessors of equipment and machinery, architects, professional engineers, and land surveyors. Most privately owned real property may be subjected to mechanic’s or materialmen’s liens. The lien attaches to all real property, including improvements, and all real property contiguous to the improved real property. Public real property is not subject to mechanic’s or materialmen’s liens.

Special Mechanic’s and Materialmen’s Lien Situations Sometimes special situations exist that prompt the creation of mechanic’s and materialmen’s liens.

Landlord and Tenant. Work performed for a tenant of real property only attaches to the tenant’s interest in the real property, and not the landlord’s, unless the landlord of the real property consents to the work and agrees to pay for the work.

Contract Seller and Purchaser. Work performed for a purchaser of real property before a purchase and sale contract closes only attaches to the purchaser’s interest unless the seller has consented to the work.

Husband and Wife. One spouse is ordinarily not an agent for the other spouse. Work performed at the request of one spouse is not a lien on the other spouse’s real property interest unless the other spouse has consented or agreed to pay for the work.

Joint Tenants. A lien binds only the interest in the real property of the joint tenant who ordered the work. A joint tenant is not an agent for the other tenants, and unless the other tenants have consented or agreed to pay for the work, their interest in the real property is not liened. Other Mechanic’s and Materialmen’s Lien Considerations

Other Mechanic’s and Materialmen’s Lien Considerations

The right to a mechanic’s or materialmen’s lien usually arises once the work is performed or the material is furnished. The lien right must be perfected by filing a notice or claim of lien in the public records where the real property is located. Most states require that this notice or claim of lien be recorded within a reasonable period of time after completion of the work (60 to 120 days). A claim or notice of lien requires the following information: (a) the amount of the claim, (b) the name of the lien claimant, (c) the name of the owner, (d) a description of real property to be liened, and (e) the notarized signature of the lien claimant. The priority of a lien claim dates from the time the first work is performed or the material is furnished. It does not attach from the date the claim of lien is filed, except for claims of architects, engineers, and land surveyors. For example, a material supplier provides materials for the construction of a home on March 1. The material supplier is not paid and finally files a claim of lien on May 1 for the unpaid materials. The material supplier’s lien claim dates from March 1, the date the materials were furnished. This also means that the material supplier is ahead in terms of priority and will be paid ahead of any other lien claims that date after March 1. A mechanic’s or materialmen’s lien is enforced through a foreclosure suit or sale of the real property. States impose time limits for filing the foreclosure suit. The most common time limit is one year from the date the claim is due. A mechanic’s or materialmen’s lien can be waived or terminated by a written waiver or release of lien. Most states require that lien waivers or releases of lien be signed by the lien claimant and be witnessed or notarized.

Mortgages and Trust Deeds

Real property can be pledged as security to pay debts of the owner. Mortgages and trust deeds are fully discussed in Chapter 10.

Easements

An easement is the right to use real property for a special purpose, such as a roadway, and can be given by the owner to a nonowner. Easements are discussed fully in Chapter 5.

Restrictive Covenants

It is possible for real property owners to restrict the use of their real property. These restrictive covenants may be in the form of restrictions or covenants found in deeds of conveyance of the real property or in restrictions that are recorded against the real property. It is not unusual for real property that has been subdivided, such as single-family home subdivisions, industrial parks, and condominiums, to have restrictions regarding the use of the property by future real property owners. Private restrictive covenants often perform the same function as public zoning regulations, but in many instances they may be more restrictive than public zoning regulations. The private restrictions attempt to regulate the development of the real property in such a manner as to enhance the value of each individual owner’s lot or share of the real property. For example, restrictive covenants found in residential subdivisions usually restrict the size of the homes that can be built on the lots, subject the homes to architectural review committees, regulate the height of the homes, and require that certain portions of the property be left vacant for purposes of creating front, rear, and side yards. All these restrictions are designed to create a nice residential environment that will enhance the value of each owner’s home. Restrictive covenants are enforced by injunction or suit for damages. Enforcement may be brought by any person who bought real property with notice of the restrictions and in reliance on the restrictions. Therefore, any homeowner in a single-family subdivision can enforce the restrictive covenants against other homeowners.

BOOK FOR CITATION

Hinkel, Daniel F.. Practical Real Estate Law (Page 90). Delmar Cengage Learning. Kindle Edition.