Many real estate buyers fail to inquire whether or not there are any liens or encumbrances affecting the property they're about to purchase. It is possible that the buyer simply expects his attorney will take care of all issues, but it's probable that the client doesn't even know what they are.
Title and Title Searches
In order to understand what a lien or encumbrance is I must discuss the basics of a title search. In Connecticut, all records affecting ownership of land are recorded at each town’s Town Clerk’s Office. The title search must be done in the town where the property is located. The title search is necessary to determine (a) who the true owner of the property is so that you may obtain a deed from the proper owner; (b) to determine that there are no title defects in the chain of title so that no one else can claim title; and (c) to determine what liens and encumbrances are attached to the title, that might affect its use or make it subject to the collection of a debt. Even if there is clear ownership, there might be other liens which limit or affect the property's use.
An encumbrance is any instrument that shows up on the title search as validly attaching to the status of the title to the property. Some encumbrances are necessary for the development of your property and will always remain on the title to your property. The most common of these encumbrances would be easements and restrictions. An easement is a right that a former property owner of the property granted to another party for the purpose stated within the easement. A common easement is granted to the electric utility company so that electric wires could run over the property. Similar utility easements may be granted for water, sewer or other distribution needs. Other easements may allow a neighbor to use your property to drive or walk over. This might have been purchased by a previous property owner, or acquired through continuous use. Another common encumbrance relates to rules and restrictions in the use of the property in a subdivision or common interest community.
A lien is an interest in a piece of property that secures the payment of a debt or future obligation. Simply stated, you should be buying your property without any liens. Typical liens are mortgages, judgment liens securing money judgments, sewer liens requiring payment for the installation of a sewer, mechanics' liens for unpaid work performed on the property, tax liens for payment of unpaid taxes to local authorities, and IRS liens for taxes to the government. If they are not paid prior to your taking title, your title is subject to the liens. There are also "inchoate" liens, which are liens that have not been fully attached for services or obligations currently occurring at the property, such as current taxes, current water usage, current sewer usage, and district taxes. It is incumbent to discover all of these and make sure they are paid to date at the time of the closing.
The subject of liens and encumbrances as they affect title is a very complicated issue. This article should help you understand what to ask your attorney to make sure that you are getting your home subject to only those encumbrances that are customary. In short, you should make sure that the property is free of all liens and subject to only those encumbrances which you are aware of and understand how they affect the property you are purchasing.