Encumbrances: liens, easements, encroachments, licenses, adverse possession

Bottom line: when you own land, other people may still hold a claim on it. Those claims are called encumbrances. A good broker finds them early, because they change what a buyer will pay and whether the deal can close at all.

An encumbrance is any claim, right, or limit that someone other than the owner holds on a piece of land. The owner still owns it. But the claim "rides along" with the land when it is sold. Think of it as a string tied to the property that a buyer inherits.

Liens: claims for money

A lien is a legal claim on a property that secures a debt. If the debt is not paid, the lien holder can ask a court (or, in Colorado, use the public trustee process for a deed of trust) to force a sale and be paid from the money. Liens are about money. Easements and encroachments are about use.

Liens come in sorted types:

• Specific lien: attaches to one named property. A mortgage-type loan (in Colorado, a deed of trust) and a property tax lien are specific.
• General lien: attaches to everything the debtor owns, not one property. A court judgment against you is the common one. Once a judgment is recorded (filed in the county records), it can reach any land you own in that county.
• Voluntary lien: the owner chose it. A loan the owner signed is voluntary.
• Involuntary lien: placed by law without the owner's say: unpaid property taxes, a judgment, a mechanic's lien, an IRS lien.

Priority: who gets paid first

Priority means the order in which lien holders are paid when the money runs short. Two rules to remember:

1. Property tax and special assessment liens come first. They sit ahead of nearly everything, even a mortgage recorded years earlier. The government does not wait in line.
2. For most other liens, first in time is first in right. The lien recorded earlier is paid earlier. Recording (filing a document in the county clerk and recorder's records, see C.R.S. 38-35-109) gives public notice of the date.

A mechanic's lien is a claim by a contractor, subcontractor, or supplier who worked on or supplied materials to a property and was not paid. It is involuntary. Its priority can be tricky, because it can relate back to when the work started, not only the day it was filed. For a broker the point is simple: unpaid work on the house can become a claim on the house, and it must be cleared before a clean title passes to the buyer.

Easements: a right to use someone's land

An easement is the right to use part of another person's land for a stated purpose, such as a driveway, a utility line, or a path. The owner keeps title. The easement is not a lien (it is not money); it is a right of use.

• Easement appurtenant: attached to a neighboring parcel. Two lots: the one that benefits is the dominant parcel; the one that is burdened is the servient parcel. It goes with the land when either is sold. Example: your neighbor's driveway crosses your back strip to reach the street.
• Easement in gross: belongs to a person or company, not to a parcel. A utility company's power line easement is the classic case.
• Easement by prescription: gained by using someone's land openly, without permission, and without interruption for the time the law requires. It works like adverse possession, but you win a right to use, not ownership.
• Easement by necessity: a court grants it when a parcel is landlocked (cut off with no way to reach a public road) because it was once part of a bigger piece. It lasts only as long as the need.

An easement ends by release in writing, by merger (one person comes to own both parcels), or when the purpose is gone.

Encroachments and licenses

An encroachment is when something built on one lot, like a fence, shed, or driveway, crosses onto the next lot. It is a physical trespass. A survey (a map made by a licensed surveyor that shows the boundaries and what stands on them) is how it is found. If it is not fixed and the owner does nothing for long enough, it can turn into a prescriptive easement or adverse possession.

A license is only personal permission to do something on someone's land, like a friend parking on your lot for a weekend. It can be taken back at any time, it is not an interest in the land, and it ends when the owner dies or sells.

Adverse possession in Colorado

Adverse possession is gaining legal ownership of land by occupying it openly and against the owner's rights for a long time. In Colorado:

• The general time is eighteen years. "Eighteen years' adverse possession of any land shall be conclusive evidence of absolute ownership." (C.R.S. 38-41-101(1))
• For claims filed on or after July 1, 2008, the person must prove every element by clear and convincing evidence, a higher bar than "more likely than not." (C.R.S. 38-41-101(3)(a))
• For those claims, the possessor (or the one before them) must also have had a good faith, reasonable belief that they were the real owner. (C.R.S. 38-41-101(3)(b))
• A shorter path: seven years if the person holds under "claim and color of title" (a paper that looks like a deed but is flawed) made in good faith, and pays all the property taxes during that time. (C.R.S. 38-41-108)
• The time limit does not run against the state, counties, cities, and other government bodies. (C.R.S. 38-41-101(2))

The common-law elements, in plain words: the possession must be actual, open and obvious, hostile (without the owner's permission), exclusive, and continuous for the full period.

How each one hurts title or value

• Liens: must be paid at closing or the buyer takes the property with the debt attached.
• Easements: limit what the owner can build or do. A pipeline strip may block a garage.
• Encroachments: cloud the title; the buyer's lender may refuse to close until it is solved.
• Adverse possession: can quietly shrink the lot the owner thinks they have.
• Licenses: little effect, but get them in writing so no one later claims more.

A broker does not give legal advice about these. A broker spots them, discloses what is known, and tells the client to ask a lawyer or title company.

Example with real numbers

A seller lists a Boulder County house for $500,000. At closing the title company finds three things:

1. A deed of trust balance of $320,000.
2. A mechanic's lien from an unpaid roofer: $18,000.
3. Unpaid property tax: $3,000.

Step by step: $500,000 - $320,000 - $18,000 - $3,000 = $159,000 left for the seller before commission and closing costs. The seller expected $180,000 and did not know about the lien. If the broker had spotted it at listing, the seller could have negotiated with the roofer weeks earlier.

Fence example: a neighbor's fence sits 2 feet over the line along a 100-foot side. That is 100 x 2 = 200 square feet. If the land is worth about $25 a square foot, the strip is worth 200 x $25 = $5,000. Small money, but a lender can still stop the closing until it is fixed with a boundary agreement.