Easements and Encumbrances

Understanding easements and encumbrances is critical for California real estate professionals, and mastering these concepts with free flashcards and spaced repetition will prepare you for exam success. This lesson covers easements (appurtenant, in gross, prescription), encumbrances (liens, deed restrictions, encroachments), and their impact on property ownership—essential knowledge for the CalBRE Salesperson Exam.

Welcome to Easements and Encumbrances 🏡

In your first lesson on Property Ownership Basics, you learned about the bundle of rights that come with property ownership. But what happens when those rights are limited or shared? That's where easements and encumbrances come into play. These legal concepts affect nearly every real estate transaction in California, and understanding them thoroughly will help you advise clients, identify title issues, and navigate complex property situations.

Think of property ownership like owning a smartphone. You own the device, but there might be restrictions (like a carrier lock) or shared access (like family sharing settings). Similarly, property can be owned but still have limitations that affect how it's used or transferred.

Core Concepts: Understanding Encumbrances 🔍

An encumbrance is any claim, lien, charge, or liability that affects or limits the fee simple title to property. Encumbrances don't prevent the transfer of title, but they do reduce the property's value or limit its use. There are two main categories:

1. Financial Encumbrances (Money-Related)

These involve money owed and include:

Liens - A legal claim against property as security for a debt. Liens can be:

• Voluntary liens: Created by the property owner's action (mortgages, deeds of trust)
• Involuntary liens: Imposed without owner consent (tax liens, mechanic's liens, judgment liens)

💡 Pro Tip: Remember the phrase "Taxes Take Top priority" - property tax liens ALWAYS come first, even if recorded later!

Specific vs. General Liens:

• Specific liens: Attach to one particular property (mortgage, mechanic's lien, property tax lien)
• General liens: Attach to ALL property owned by the debtor (judgment liens, IRS liens, state tax liens)

2. Non-Financial Encumbrances (Use-Related)

These affect how property can be used:

Easements - The right to use another's land for a specific purpose

Deed Restrictions - Private limitations on land use (CC&Rs in subdivisions)

Encroachments - Physical intrusion of one property onto another (fence, building, driveway)

Licenses - Personal, revocable permission to use land (not an easement!)

Easements: Your Neighbor's Right to Your Land 🛤️

An easement grants someone the right to use another person's land for a specific purpose without owning it. The property benefiting from the easement is called the dominant tenement, while the property burdened by the easement is the servient tenement.

┌─────────────────────────────────────────────┐
│         EASEMENT RELATIONSHIPS              │
└─────────────────────────────────────────────┘

   Dominant Tenement (benefits from easement)
            🏠 Property A
            │
            │ Has right to cross
            ↓
   ═══════════════════  ← Easement (road)
            │
   Servient Tenement (burdened by easement)
            🏡 Property B

Types of Easements

1. Easement Appurtenant 🔗 The most common type - "runs with the land" and transfers automatically when property is sold.

• Dominant tenement: Property that benefits
• Servient tenement: Property that is burdened
• Both properties must be clearly identified
• Transfers with ownership (doesn't need to be mentioned in deed)

Example: Property A (landlocked) has an easement to cross Property B to reach the public road. When Property A sells, the new owner automatically gets the easement rights. When Property B sells, the new owner takes it subject to the easement burden.

2. Easement in Gross 👤 Benefits a person or entity rather than a particular piece of land. No dominant tenement exists.

• Commercial easements in gross: Transferable (utility company power lines, pipeline easements)
• Personal easements in gross: Usually not transferable (fishing rights, personal access)

Example: Pacific Gas & Electric has an easement in gross across your property to maintain power lines. This easement benefits PG&E as a company, not any specific property they own.

3. Easement by Prescription ⏰ Acquired through continuous, open, and hostile use for the statutory period (5 years in California).

Requirements (remember COHAN):

• Continuous use (uninterrupted for 5 years)
• Open and notorious (visible, not secret)
• Hostile (without permission)
• Adverse to owner's interests
• Need actual use (consistent with easement claimed)

⚠️ Important: Paying property taxes on the used portion is NOT required for prescriptive easements (unlike adverse possession!).

How Easements Are Created

Creation Method	Description	Example
Express Grant	Written document conveying easement rights	Deed specifically granting neighbor access
Express Reservation	Seller reserves easement when selling property	"Seller reserves easement for utility access"
Implication	Implied by prior use or necessity	Landlocked property has implied easement
Necessity	Created when property has no access to public road	Subdivided landlocked parcel
Prescription	Continuous hostile use for 5+ years	Neighbor uses your driveway for 5 years

Easement by Necessity vs. Implied Easement:

• Necessity: Property is landlocked and has NO other reasonable access (very high standard)
• Implied: Based on prior use when property was unified; use must have been continuous, apparent, and reasonably necessary

Terminating Easements

Easements can end through:

1. Express release: Written document releasing the easement
2. Merger: Same person acquires both dominant and servient tenements
3. Abandonment: Dominant owner shows clear intent to never use again (actions speak louder than words!)
4. Estoppel: Servient owner reasonably relies on statements that easement won't be used
5. Destruction: Servient tenement is destroyed (building burns down)
6. Excessive use: May be limited or terminated if misused
7. Expiration: If created for specific time period
8. Condemnation: Government takes property via eminent domain

⚠️ Common Mistake: Non-use alone does NOT terminate an easement! There must be affirmative acts showing intent to abandon.

Other Types of Encumbrances 📋

Deed Restrictions (CC&Rs)

Covenants, Conditions, and Restrictions are private limitations on land use, commonly found in:

• Planned developments
• Condominiums
• Subdivisions
• Homeowner associations (HOAs)

These might restrict:

• Building design and colors 🎨
• Fence heights and materials
• Commercial activities
• Vehicle parking (RVs, boats, commercial trucks)
• Pet ownership
• Landscaping requirements

Covenant vs. Condition:

• Covenant: Breach allows lawsuit for damages or injunction
• Condition: Breach could result in property reverting to grantor (rare, strictly construed by courts)

💡 Disclosure Requirement: In California, sellers must provide CC&Rs to buyers, and buyers have specific rescission rights for HOA properties (Civil Code §1368).

Encroachments 🚧

An encroachment occurs when a structure or improvement illegally intrudes on another's property:

┌──────────────────────────────────────┐
│    COMMON ENCROACHMENTS              │
├──────────────────────────────────────┤
│                                      │
│  Property A          Property B      │
│     🏠                  🏡           │
│      │\                              │
│      │ \  Fence encroaches →        │
│      │  ═══════════════              │
│      │          ↑                    │
│   Boundary   Actual fence            │
│              crosses line            │
└──────────────────────────────────────┘

Common encroachments:

• Fences slightly over boundary line
• Roof eaves extending over property line
• Trees with branches/roots crossing boundaries
• Driveways partially on neighbor's land

Why it matters:

• May prevent clear title
• Could ripen into prescriptive easement after 5 years
• Title insurance typically excludes survey matters
• Should be disclosed to buyers

Solutions:

• Remove the encroachment
• Grant easement to legalize it
• Quitclaim deed for small strip of land
• Boundary line adjustment

Liens: When Property Secures Debt 💰

A lien is a charge against property making it security for payment of a debt or obligation. Think of it as a legal "IOU" attached to the property title.

Voluntary Liens

Created by property owner's intentional action:

1. Mortgage / Deed of Trust - Primary financing instrument in California

• Borrower pledges property as security
• Lender records to perfect their interest
• Priority based on recording date (first recorded = first position)

2. Home Equity Loans - Second mortgages or HELOCs

• Subordinate to first mortgage
• Higher interest rates due to increased risk

Involuntary Liens

Imposed without owner's consent:

1. Property Tax Liens 🏆 (Always First!)

• Attach automatically on January 1st (lien date)
• Take priority over ALL other liens
• Can result in tax sale if unpaid

2. Special Assessment Liens

• For local improvements (sidewalks, sewers, street lights)
• Second priority after property taxes
• "Mello-Roos" districts in California

3. Mechanic's Liens

• Contractors, laborers, material suppliers
• Must be filed within 90 days of completion
• Priority relates back to project commencement date
• Preliminary notice required (20-day notice)

💡 California Specific: Contractors must provide homeowners with specific notices about mechanic's lien rights. Failure to provide proper notice can invalidate the lien!

4. Judgment Liens

• Result from court judgments
• Become general liens on all real property in the county when recorded
• Good for 10 years (renewable)

5. Federal Tax Liens

• IRS liens for unpaid federal taxes
• General liens (attach to all property)
• Take priority from date of recording (except property tax liens)

Subordination Agreements

A subordination agreement changes lien priority voluntarily. The senior lienholder agrees to take a junior position.

Common use: When refinancing, the second mortgage holder agrees to remain in second position after the new first mortgage.

Examples: Real-World Applications 🌍

Example 1: The Landlocked Property

Situation: Maria is buying a beautiful 5-acre parcel in rural Sonoma County. During due diligence, she discovers the property has no direct access to the public road. The previous owner always drove across the neighboring ranch to reach the highway.

Analysis:

• Maria needs an easement to access her property
• If the neighbor refuses to grant one, Maria may claim an easement by necessity (property is landlocked)
• Alternatively, if the previous owner used the route for 5+ years openly and continuously, there might be an easement by prescription
• Better solution: Negotiate an express easement with the neighbor and record it

Why it matters: Without legal access, Maria's property has severely diminished value and may be impossible to finance. This is a critical title issue that must be resolved before closing.

Example 2: The Encroaching Fence

Situation: During a property survey ordered for a sale, it's discovered that the seller's fence encroaches 2 feet onto the neighbor's property. The fence has been there for 15 years, and both parties thought it was on the boundary line.

Analysis:

• This is an encroachment (physical intrusion)
• After 5 years of open, continuous use, this may have ripened into a prescriptive easement
• The seller has potential claims: adverse possession (if paying taxes on that strip) or prescriptive easement (for continued fence location)

Solutions:

1. Boundary line adjustment: Both parties agree to move the legal boundary to match the fence
2. Grant easement: Neighbor grants easement to legalize fence location
3. Purchase strip: Seller buys the 2-foot strip from neighbor
4. Move fence: Expensive but cleanest solution
5. Quitclaim deed: Neighbor deeds the strip to seller

Practical tip: This is why buyers should ALWAYS get a survey! Title insurance typically excludes matters that a survey would reveal.

Example 3: Lien Priority Dispute

Situation: A property goes into foreclosure with these recorded interests:

• First mortgage: $400,000 (recorded 2020)
• Second mortgage: $50,000 (recorded 2021)
• Mechanic's lien: $25,000 (work started March 2022, recorded June 2022)
• Unpaid property taxes: $15,000 (for 2022-2023)
• Judgment lien: $30,000 (recorded 2023)

Property sells at foreclosure auction for $480,000.

Payment priority and distribution:

Priority	Lien Type	Amount Owed	Amount Paid	Remaining Balance
1st	Property taxes	$15,000	$15,000	$465,000
2nd	First mortgage	$400,000	$400,000	$65,000
3rd	Mechanic's lien*	$25,000	$25,000	$40,000
4th	Second mortgage	$50,000	$40,000	$0
5th	Judgment lien	$30,000	$0	$0

*Note: Mechanic's lien priority relates to work commencement date - could be ahead of recorded mortgages if work started earlier!

Result: The second mortgage holder receives only $40,000 of their $50,000 claim (losing $10,000), and the judgment lien holder gets nothing. This illustrates why junior lien positions carry higher risk!

Example 4: HOA Restrictions Conflict

Situation: Roberto wants to paint his house bright purple and park his food truck in the driveway. The HOA CC&Rs require "earth tone colors" and prohibit commercial vehicles in driveways.

Analysis:

• CC&Rs are deed restrictions (non-financial encumbrances)
• They are enforceable covenants that run with the land
• Roberto agreed to them when purchasing (whether he read them or not!)
• HOA can obtain injunction to force compliance and potentially fine Roberto

California specific considerations:

• CC&Rs cannot prohibit solar panels (Civil Code §714)
• Cannot completely ban rentals (but can regulate)
• Cannot prohibit artificial turf in drought conditions
• Must be "reasonable" - courts will strike down arbitrary restrictions

💡 Agent's duty: Must ensure buyers receive and review CC&Rs before purchase, especially in HOA communities. Many buyers don't realize how restrictive these can be!

Common Mistakes to Avoid ⚠️

1. Confusing easements and licenses

• ❌ Wrong: "The neighbor gave me a license to cross his property, so I have permanent access rights"
• ✅ Right: Licenses are revocable permission, not property rights. Get a recorded easement for permanent access!

2. Thinking non-use terminates easements

• ❌ Wrong: "The utility company hasn't used their easement in 10 years, so it's abandoned"
• ✅ Right: Non-use alone doesn't terminate easements. There must be affirmative acts showing intent to abandon.

3. Missing the mechanic's lien priority trap

• ❌ Wrong: "I recorded my mortgage first, so I'm ahead of all other liens"
• ✅ Right: Mechanic's liens relate back to commencement of work, which could predate your mortgage recording!

4. Forgetting property tax lien supremacy

• ❌ Wrong: "My first mortgage has priority over everything"
• ✅ Right: Property tax liens ALWAYS take first priority, regardless of recording date!

5. Assuming title insurance covers all encumbrances

• ❌ Wrong: "Title insurance will cover any survey problems"
• ✅ Right: Standard title policies exclude matters that a survey would reveal (encroachments, boundary disputes). Get a survey!

6. Ignoring prescriptive easement risks

• ❌ Wrong: "My neighbor has been crossing my land for years, but I don't mind"
• ✅ Right: After 5 years of open, continuous use, they may acquire permanent easement rights! Give written permission to prevent this.

7. Not properly terminating easements

• ❌ Wrong: "We shook hands and agreed the easement is done"
• ✅ Right: Easements should be terminated in writing and recorded to clear the title.

Memory Devices 🧠

COHAN - Requirements for prescriptive easement:

• Continuous (5 years)
• Open and notorious
• Hostile (without permission)
• Adverse to owner
• Need actual use

"Taxes Take Top Priority" - Property tax liens always come first!

"MERGE to End" - Ways to terminate easements:

• Merger (same owner)
• Expiration (time runs out)
• Release (written)
• Government taking (condemnation)
• Estoppel (reasonable reliance)

"Dominant = Benefits, Servient = Suffers" - Remember which property is which in an easement appurtenant

Key Takeaways 🎯

✅ Encumbrances limit or affect property ownership but don't prevent transfer of title

✅ Financial encumbrances (liens) involve money owed; non-financial encumbrances (easements, restrictions) affect property use

✅ Easements appurtenant run with the land and transfer automatically; easements in gross benefit a person/entity

✅ Prescriptive easements require 5 years of continuous, open, hostile use in California (remember COHAN)

✅ Lien priority: Property taxes ALWAYS first, then special assessments, then other liens by recording date (except mechanic's liens which relate back)

✅ Mechanic's liens get special priority dating back to when work commenced, not when recorded

✅ CC&Rs are private restrictions that run with the land and are enforceable by HOAs or other property owners

✅ Encroachments should be addressed before closing - they can ripen into prescriptive easements after 5 years

✅ Non-use alone never terminates easements - must show affirmative intent to abandon

✅ Title insurance doesn't typically cover survey matters - buyers should get surveys for encroachment detection

📚 Further Study

1. California Department of Real Estate - www.dre.ca.gov/files/pdf/refbook/ref16.pdf (Chapter on Property Ownership)
2. California Civil Code §§801-806 - Statutory provisions on easements: leginfo.legislature.ca.gov
3. Mechanic's Lien Overview - www.cslb.ca.gov/consumers/legal_issues/mechanic_lien.aspx (California Contractors State License Board)