Florida Title Company Explains Encumbrances
If you are a realtor, or looking to buy or sell a property, it’s vital to understand how title defects and encumbrances may affect the property’s title. Our title company explains how these issues could be detrimental to your property sale or purchase.
What is a Title?
The title is the legal basis for ownership to a piece of property. In property law, a title is considered a ‘bundle of rights’: there are different legal ‘rights’ to the property that can be broken up and dealt with individually. So, for example, the homeowner has rights to own, sell, and use their land – within the reasonable limits of the law.
The title is not one single document, but rather the collection of all documents that have legal bearing on the property. This includes chain-of-title documents (like deeds), court records, and documents recording encumbrances and liens (including when or if the liens were paid off).
What are Encumbrances and Defects?
Encumbrances and defects refer to any claim or liability against the property, which in turn affect the property’s title and value. They can limit the owner’s rights to use their land, depending on the type of encumbrance.
Some encumbrances come with the land or title, and cannot be refuted or changed. For example, your property may fall under certain zoning restrictions that prevent you from building an extension to your home. Another common title encumbrance that cannot be changed are utility easements, which allow utility companies to provide water or electricity to your property.
Other defects – like liens and outstanding debts – can be mitigated to a certain extent. Before buying a property, for example, the buyer can insist that the seller settle all outstanding liens against the property, thus protecting the buyer from taking on that liability. The title company will ensure that any such matters are resolved.
Unfortunately, many title defects are ‘hidden’: even a thorough title search may not be able to reveal all the encumbrances against a title. This is most common with issues like inaccurate or forged paperwork, or undisclosed heirs.
How Encumbrances Affect Your Title
For realtors or private citizens looking to buy a property, keep in mind that these encumbrances may affect your title, your property value, and your rights to use your property. Real estate agents need to disclose all known encumbrances to their clients before suggesting that they buy a property, and should always insist upon a professional title search before any sale is negotiated.
For sellers, title defects can affect the marketability of your title – making it difficult to find a buyer. Ideally, you should settle all known outstanding liens and mortgage payments before trying to sell the property. If the seller cannot provide a marketable title, the buyer may back out of the sale.
For more information about how encumbrances may affect your title, contact Florida Home Title Company today.