The term property does not necessarily refer to a physical object. Rather, it describes a legal relationship between a person and a thing. Property is a legal concept that gives and protects a person’s exclusive right to own, hold, use and dispose of a thing.

But before you start adding properties to your portfolioWhether it is for investment or other purposes, there are some things you need to understand. This article reviews the basics of two key concepts related to property: nonpossessory interests and encumbrances.

What are non-ownership interests?

A non-proprietary interest is the right to use or restrict the use of another person real estate or land. In some cases, the non-ownership interest arises from a voluntary agreement entered into between two parties, as in the case of a lease.

In other cases, the non-ownership interest arises due to a court order, such as lien on the property. For example, a federal tax lien may be filed with the court in the county where a delinquent taxpayer’s property is located.

Although the holder of a non-ownership interest has certain and clear rights regarding the use of a property, they do not have title to the property.

Types of Non-Ownership Interests

Real estate

Real estate consists of land, tenancies and inheritance. Landing refers to the ground, the air above, the area below the earth’s surface, and anything raised on it. Leaseholds include the land and certain intellectual property rights related to the land. Inheritance, on the other hand, includes any tangible or intangible interest in real property, including land and tenements, that can be inherited.

Interest

A interest describes any right, claim or privilege that an individual has over land or real property. The law recognizes different types of interests in real property. A non-proprietary interest in land is a person’s right to use or restrict the use of land belonging to another person.

Non-ownership interests do not constitute ownership of the land itself. Instead, holders of a non-ownership interest in real property have no title, and the owner of the land continues to enjoy full ownershipsubject to possible encumbrances.

What is a load?

An encumbrance is anything that may reduce the value or use and enjoyment of property, such as a lien or limited covenant. Because encumbrances can have a negative effect on land value or land use, everyone involved in a real estate the transaction should be aware of the existence of any encumbrances on the property being transferred.

A lawyer usually performs one title search and forms a title perception, where any encumbrances discovered during the search will be specified. An encumbrance does not prevent title from passing in a property transaction. Rather, title passes subject to any encumbrances. In other words, an encumbrance remains on the property, or runs with the land, until it is satisfied, even when title passes to a new owner.

Types of loads

Easement

A easement is a non-possessive right to use another’s land in some limited way that does not constitute full ownership. The person or legal entity that benefits from the easement has a non-proprietary interest in the other’s land. This means that the property owner is burdened by the easement.

Common easements include rights of way, drainage ditches, utility lines, and easements by condemnation, which are commonly known as eminent domain.

Infringement

A infringement is an improvement that extends beyond a property owner’s boundary line and encroaches on an adjacent property. Examples of encroachment are buildings or overhanging eaves, outbuildings, fences, driveways and walkways.

Trespassing may render ownership of both properties involved unsaleable. This is because the trespassing property does not have title to all the land on which improvements have been made, while the encroached property does not have the use of all the land.

Lease agreement

A rent is an agreement between a property owner (landlord) and a person or entity that wants to rent the property (tenant). Under a lease, the lessor agrees to allow the lessee to occupy and use the property in exchange for rent or valuable consideration.

The rental agreement usually specifies the duration of the agreement, any conditions for extending the agreement, and the amount and frequency of rent which will be paid. Even if the tenant owns the property, the landlord remains the owner and holds title to the property.

Liens

A impounded is a right established by law granted to creditors to have debts owed to them discharged by the sale of property belonging to the debtor. The property functions as securityand in case the property is transferred, the proceeds of the sale can be used to pay the debt and satisfy the lien.

Common liens include property tax and assessment liens, mechanics liens construction liensjudgment liens and federal tax liens.

Lis Pendens

A lis pendens is a Notice of Pending Litigation that informs all interested parties that a legal action has been commenced affecting the ownership of a particular property. A lis pendens, which can be filed in either a state or federal court, usually involves ownership of real property or an asserted ownership of the real property.

Since a lis pendens is filed against real property, any person to whom the property is transferred will be bound by the outcome of the pending litigation.

Protective or restrictive covenants

A protective or restrictive covenants is an enforceable condition that appears as a clause in a deed that limits the way in which real property can be used. These covenants charge property owners to perform or not perform in specified ways.

Examples of protective or restrictive covenants include restrictions on minimum floor areas in a new building, architectural design, setbacks and side lines from roads or neighboring properties, and exterior color of the home.

Bottom line

It is important to do a title search when you are considering buying real estate. Doing so will help you determine if there are any title defects that may affect the use of the property. A qualified attorney can perform a title search to uncover any liens or loads against the property.

Many properties are sold with all liens and encumbrances, which means that the property may be encumbered. It is therefore in the buyer’s best interest to discover possible encumbrances before any final decisions are made.

A general warranty deed is the buyer’s best protection and contains a covenant against encumbrance guarantee assuring the buyer that there are no encumbrances on the land other than those stated in the deed.