114. Encumbrances and Liens

All right, in this lesson, we're going to look at incumbrances and leans. And the topics to be covered are incumbrances, easements, encroachments, licenses, deed restrictions, leans, and foreclosure. If we look at the basic definition of an incumbrance, so we go to Merrim Webstream, m-w-w-com. The definition of an incumbrance is something that incumbers an impediment of burden. If we go to Investopedia, the definition of an incumbrance is a claim against a property by a party that is not the owner. If we go to Law.com, the definition of an incumbrance is a general term for any claim or lean on a parcel of real property. And these can include mortgages, deeds of trust, recorded abstracts of judgment, unpaid real property taxes, tax leans, mechanic leans, mechanics leans, easements, and water or timber rights. An incumbrance enables a non-owning party to restrict the owner's bundle of rights. So for example, a tax lien or a mortgage lien or an easement or an encroachment that restricts, it enables a non-owning party to restrict the owner's bundle of rights. If we look at the definition of an encroachment, so just to go ahead and look at an encroachment, we'll come back to that. We'll come back to encroachments. So it's an interest that limits the freeholders or the legal owners freehold interest. An encroachment does not include the right of possession. So therefore it is not at the same level as the owner's freehold interest. So that's why an encroachment is not considered in a state. But it can lead to the owner's loss. It can interfere with that freehold interest. Easements and leans are the most common types of encumbrances, but we've talked about some of the others. The mortgage, deed of trust, abstract judgment, property tax leans, mechanics leans, water and timber rights. So that's under the heading of incumbrance. So easements and leans are the most common types of an incumbrance. An easement, when we look at the definition of an easement, it is the right to use the land of another for a specific and limited purpose. So let's talk about easements. So under easements, we'll talk about the two types of easements, the two broad types of easements which are an easement, a pertinent and an easement in gross. So as I mentioned, the definition of an easement is the right to use, it's an interest in land. It's a non-possessory interest. So an easement holder has a right to access the property of another, but does not have a possessory interest in that property. So if we go back to the bundle of rights, under the freehold of state, that's one of the elements in relation to those bundle of rights is the right possession. And that falls both under the freehold and leasehold of state. But an easement is not, it's an interest in the property, but it does not include a possessory interest. An easement may apply to the surface, to the subsurface or to the airspace, but what we want to look at is the specific area that's defined for that easement. There are times where an interest holder in that easement may have a blanket easement across the property. And what that means is that they have a right to put that easement anywhere across that property. You may see that in some older recorded documents, some older recorded easements. And an easement such as that, a blanket easement severely restricts the property owner's rights to use that in that land. They're interesting in that land because if you had a blanket easement across the property and an easement that easement interest holder had a blanket easement. And then the owner improved the property. Let's say you put office building or residential development or a multifamily project on that property, that easement holder with that interest holder with the blanket easement could come in and say, I need to put this easement here, from point A to point B, and it just happens to run right down the middle of the property. So that creates some significant issues for that property owner. So it's best to have that area for the easement specifically defined. So we've got the two types of easements, easement apartment and easement and gross. And before we get into that, we'll talk about some general characteristics of an easement. So you have a receiver of the easement right as a benefited party and the giver of the easement right is the burdened party. So some characteristics of easements and easement must involve the owner of the land over which the easement runs. So if you own a piece of property, then you can give an easement over that property. You can't give an easement over your neighbors property because you do not have any ownership rights to do so. You don't have an interest in that neighbor's land next door to be able to give an easement to a third party over your neighbor's land. So the owner must give that easement to the benefited party. An easement will be within a defined area of a property's boundary. And so again, that could be the surface, subsurface or the airspace. An easement may be affirmative, which allows a use such as the ability to drive across the property of another or it can be negative. So an affirmative easement would allow a use and negative easement prohibits a use. So for example, if you had a negative easement on a property, it could be that you could not build into a certain portion of the airspace on that property. So that may be for visual easement rights, for visual easement purposes, like if you're in the mountains and in a subdivision, so that you cannot use that airspace. So the two basic types of easements, we have the easement and growth, I mean the easement of pertinent and the easement and growth. So the easement of pertinent and the easement and growth. And the easement of pertinent, two things to note is that it will have a dominant estate and a servant estate. So or or also called a tenement, but I call it an estate. So it'll have a dominant estate and it will have a servant estate. So the dominant estate is the estate that is benefited by that easement or from that easement. And the servant estate is the estate that is burdened by that easement. So two things to remember on an easement of pertinent is that there will be a dominant estate and there will be a servant estate. And the dominant estate is the property that is benefited by that easement and the servant estate is the property that is burdened or encumbered by that easement. Remember when we were talking about encumbering, just the definition of the cumbers at the very beginning, something that encumbers an impediment of burden. So that easement encumbers the servant estate. So for an example, if you have a partial property, let's say two parts is a property, one on the south and one on the north. So one on the bottom, one on the top. And the neighbor on the top needs to access their property by driving across the property on the bottom. property on the bottom, a lot a or track a and the property on the top track. B and there's a road that fronts track A at the bottom. So the owner of block B wants to drive down the road and then drive across A's property to access their property track A. So in this case, track B would be the dominant estate and track C, I mean track A's, track C, track A would be the serving estate. So track B benefits from the easement track C, I keep saying track C, I don't know where track C came from, it's not even in this, it's not even in the picture of my mind. So track A is the serving estate. So track B is the dominant estate that has benefited from the easement. Track A is the serving estate and track A is burdened or encumbered by that easement. That means there's an easement that an area that the owner of B can drive across on A's land, taxis B's property. Now one of the things to note is that that easement across A's track of land should be very specifically defined in terms of where exactly it's located on the property of the width and then also the intended use. So what rights does B have in that interest? So A would want to limit those rights to just driving a, let's just say even say non-commercial vehicle across that easement. So basically driving a passenger vehicle across that easement. And then you could get into who's responsible for maintenance of that easement. That easement will attach to the land. So the apartment, a pertinent, that term of pertinent means attaching to. So an easement of pertinent attaches to the estate and then it transfers with the estate. So that means if track A is sold that that easement or we also say it runs with the land, it stays with that land. It doesn't because A sells the property to another third party, that easement doesn't go away. It stays in place. So it attaches to that, that a stated attaches to that land or it's what we call it runs with the land. And so and then if B sold B's property that easement continues to remain in effect for the benefit of the owner of the track B. So whoever owns B has that right has that interest in that easement. Generally we want we want to clause in that easement that says it's non-exclusive. So what that means is that if it was an exclusive easement then that means only the interest holder could use that easement. So then only the owner of track B could use that easement. And A does not want to give up that right to use its portion, his or her portion of that property. So we want to say that that easement is a non-exclusive use easement. We don't want to holy burden track A. All right and then there are types of easements and one type of easement easement by necessity. So an easement by necessity generally comes into play under a court order because there is a need to access a track of land. So I'll give you an example. Let's say that an individual owns a ten acre track of land. And let's say there's there's a road that is on the southern boundary of that track of land. And a house, the house that the owner lives in is on the northern boundary or northern part of that track of land. And so the only way to access that track of land is by road through the southern boundary that but the southern boundary of that property. And so let's say the owner decides that he wants to sell a track or subdivide the ten acres into two smaller five acre tracks. And so the southern track will be five acres and will not have any improvements and the northern track will be five acres and will have a house and utilities. And let's say he sells those two five acre tracks to two separate individuals. But when he did so there's a road. Let's say there's a dirt road that goes a jeep road, what we might call a jeep road, that goes from the the farm and the market road to the house. But when he sold those two tracks of land or the two tracks he failed to include a means of access, a means of point of ingress and egress for the owner of track B, the northern track. And so the only way to access that property, let's say there's no other means of access. It's what we call it's what we call landlocked. So there's no other way to access this. You know, the only way is you could you could fly in, you know, you could drop in by helicopter or something like that. But otherwise there's no way of accessing this track of land. Except through the easiest way, the most efficient, most convenient, easiest way is through track A on that jeep road. That has been in place for let's say 30 years. So there's no legal access to track B other than by air. And so in this case, B could go to A and say, I need an easement across your property and A can say no. And then, you know, maybe they tried to negotiate and there's another option, negotiations fall through. And such a second option. So A just outright says no. In another scenario, the parties attempting to negotiate and A wants more money for the easement than B's willing to pay or what B thinks is reasonable. And so then the third option is to go to court and ask the court for an easement by necessity. And that's because this track that B purchased was landlocked and it was not an issue that was created by B. So B did not create this situation. It was created by another third party. Now in reality, what you should do just as an aside is get a survey and that survey will show a point of ingress in egress or the lack thereof. And then another thing would be to get a title policy. And as part of that title policy, the title company is going to want to see a survey in this instance and they're going to be looking for a point of ingress in egress. Otherwise, they're going to say, we're not going to ensure that issue. And so if you want us to ensure that issue, you've got to get an easement across this property. And so that's something that is part of the negotiations with the original owner that B should have negotiated was for a point of ingress in egress. That's something that the original owner should have taken into consideration anyway. Another example would be a party wall easement. And this is a wall. It's a common wall that shared by two separate structures along a property boundary. So this could be a example where you've got a fence, like a, let's say a rock fence that borders a property. And in this case, the both parties agree a wall will divide the two properties. And that because the wall will be on the center line, but it will also be on both properties that the parties agree that they will not do anything to jeopardize the use by the adjacent property owner of that wall. And so that would be a negative easement that comes into play in terms of what you can't do, something that you can't do in relation to that easement. And then it should also likely include a maintenance agreement in relation to maintenance and repair of the wall. So for example, you've got two individuals. They want to put a wall along the fence line. They both agree that they own a portion of the property that the wall sits on. And then they grant each other an easement, an easement of pertinent in relation to that wall on their property. And so that way the reason you do that is you don't want to give up any rights in the land. You don't want to give up any potential ownership interest in that land. Another example would be maybe a neighbor needs extra room to park a vehicle. And so they say, would you sell some of your land so that we have enough room to add an extra section of the driveway to park a vehicle? And the adjacent land owner says, no, I don't want to sell that land. I don't want to give the rights of that land, but I'll grant you an easement. I'll sell you an easement to that land. And then there are some so you an interest in an easement in that land. So that way the owner's not giving up any. anything. Here's a story of an easement that I worked on. This goes back many, many, many years. And this was a scenario where the property, properties in this area had zero lot lines. What that means is there's no setback. It means that you could build an improvement right up to the boundary line of that property. Now, and if you go into a plot, what we call a platyth subdivision, that platyth subdivision will generally have setbacks on the front, the sides and the rear property lines. But in this case, there's no setback lines. And so there was a neighbor that built improvements that came right up to the boundary line. And so the main structure, the main wall, the foundation and the wall were on that individual's property. However, we got the phone call because the, the Jason neighbor said that the guy next door is trespassing onto his property. What had happened is is the eaves of that property were overhanging in from the house were overhanging into the neighbor's yard. And he said, I don't, I don't want to, I don't want that hanging over into my yard. So through negotiations, we were able to work out an easement to where the individual that built the improvement with the eaves hanging over to the neighbor's yard, he basically paid for an easement. Now, it wasn't just an easement for that strip of land. It was actually an easement that started in the air where that eaves began and then went up a certain height to the, to the crest of that, that roof or that, that, that, that, that, that, that, that, that, that, that neighbor did not have any rights to access the land, to walk upon the land, to do anything on the land of the neighbor. All he had was the right to allow the eaves to hang over into his neighbor's property. And so that's an example where an easement wasn't negotiated purchased. And then a document was written up to solidify that agreement between the parties. So another, we talked about an easement of pertinent is the big picture heading for easements. And then a second type of easement is an easement in gross. So we have easement of pertinent and we have easements in gross. And an easement in gross, the one thing to note about an easement of gross is that it only has a servant estate. So there's no dominant estate. So that's one thing we saw with the easement of pertinent is that there's a dominant estate and a servant estate. But what is an easement in gross, there's only an a servant estate. A easement in gross may be personal or it may be commercial. So giving example of that we that you generally see with an easement of gross would be the right of a utility company to put their utility lines across your property. And then the benefit of that is that in this case, it's going to be it's still an occurrence because it's an easement that burdens that that property. However, it allows that utility company be an electric water sewer, gas, cable, TV, internet to add their utilities to your property. And so as a result, you get the benefit of those utilities if you own that property. So an easement of gross is a personal right. It grants the right for one party to use the grantor's property. And then it only involves one property, which is the servant estate. So an example of a personal easement, it's irrevocable right. But it terminates upon the grantee's death. So it's a personal right for that individual and only that individual. So for example, it might be you have a you own a lake or you own a house on the on the ocean front. on the beach on the beach. And you've got some somebody somewhere in the neighborhood, but they want to be able to access the beach by walking across your property. And so you you give them that right. They pay for that right. You give them that right. So in this case, it is for the benefit of that individual. Now it's not tied to to that individual's property. So that way there's no dominant estate that benefits from this. It's just a servant estate, which is your property that is burdened by this easement that is encumbered by this easement. But in this case, because it's personal in nature, it it's only an effect during the lifetime of the grantee. That's the individual that has the right in the easement. As an example, I mentioned on a commercial easement, that would be installing utility lines onto the property and connecting into the house so that the house has utilities. So that would be an example of a commercial easement commercial easement and grooves. So easement creation. So an easement may be created by voluntary action, by necessary or prescriptive operation of law or by government power of imminent domain. So if we have a voluntary easement, this is where an individual creates an easement by express grant. That would be by by signing a document and having it notarized and then recorded with the county clerk that grants an easement. An easement by necessity. There are a couple of ways you can get an easement by necessity. We already talked about one example. That was the landlocked example. Another example can be by easement by prescription. And so this easement by prescription is similar to if you've ever heard of adverse possession. So it's not exactly the same, but it's similar to that. And that's where if you use somebody else's property for a certain time period and you do or don't do certain things, then you may have a right or an interest in that property. And so the same applies to an easement. So if you had somebody using, so let's say in that scenario I mentioned earlier with easement by necessity, you had a situation where the owner sold the two tracks of land to two parties. And let's say in this case they ended up being family members. So let's say it was two brothers. And so the brother on the southern track ends up building a house on that property and then the other brother moves into the property on track B. And let's say they both lived there for 20 years and the brother that owns track B drives across the G-Brode, across track A to access his property for 20 years. And you know they both maintain the G-Brode, you know they make improvements that are necessary, any maintenance, any repairs. And then after let's say after 20 years, the owner, the brother that owns track A decides to sell it. And the new owner buys the property and moves in and then puts up a fence on the rear property line of track A. And the brother says, hey I use this road to access my house. I need you to take down that fence or at least put in a gate. And the owner of track A, the new owner of track A says no. You don't have an easement across my property and I'm turning to that right. So one option is to try to buy an easement, you know negotiate the purchase of an easement, even though it's been an effect for more than 20 years, it's 20 years that both brothers and the property's plus the however long that road had been in place before when the previous owner owned the property. And so then the other option is to go to court. Now there's two options. The brother could claim an easement by necessity or could claim an easement by prescription. Now that's where it gets a little dicey because you've got to meet the requirements of an easement by position and that may, I mean, by prescription. And that may not fly if you follow the requirements of open hostile actual. See, we got a notorious uninterrupted for the required time frame. And so it must be adverse in nature. And so those elements generally follow similarly close to an adverse possession claim or the elements of an adverse possession claim. And so the hostile and notorious may not fly in this scenario since the other track was owned by the brother. So let's will change the scenario. Let's say that you've got But the change this scenario up a little bit to make it work a little bit better. So you've got the original owner sells the two tracks, individual moves into track B, into the house and track B. The individual that purchased A, you know, never looks at it. They don't do anything with it. So the owner of track B continues to drive across that road for the next, to say for the next 15 years. Then the owner of track A passes away and his airs and herds that track. And then they show up and they say, "Oh, wait a minute. We're going to put up a gate in her fence and stop this access across the land by the owner of track B." So in that case, now track, the owner of track B could claim that he had access that property openly. You know, so it wasn't secretively. It wasn't in the night. It wasn't when anybody wasn't looking. It was actual. He drove across the property every day, you know, two and from the house to get to work and then back home after work. And then the go grocery shop and go out to eat. So the road was used continuously and there's evidence of it. You can see the Jeep road has been maintained. It's been repaired. It's been kept in the same condition that it has been for the last 15 years. So in that case, the owner of track B may have a decent claim of an easement by prescription because of the manner of the use of the property. The issue you get into on that is how a court will decide in that jurisdiction. You get into the time, you get into the expense. And it's not something that's going to be easy. It's not going to be something that's inexpensive either. And then anytime you go into litigation, you know, the advice that attorney will often give is that it's going to be a 50/50 scenario in terms of how this plays out. So again, you got Adverson Hostile. You know, the use has been without permission. Open and notorious. The owner knows or is presumed to have known of the use. So let's say that the owner, the previous owner before he passed away, would show up every now and then and talk to the owner of track B. So he knew, and that's an error, he knew that he was driving across the land and then continue it. So it's been uninterrupted for, if you go to the Texas statute, the Civil Practice and Remedies Code, it will outline the timing requirements for adverse possession. And then we go to case law to also look and see what the requirements, how the courts have applied that. So another example is also by imminent domain. So this is the government's right to take the property of a private individual for just compensation. And so there may be an instance where the government needs access across the land for a certain reason. So it's a way that they need to extend a sewer line across the property to access, you know, to tie in to a new sewer line that's been put in place for development. So in that case, the owner says, no, I'm not going to sell you an easement across my land. And that's in the government could come in and say, we need to, we need an easement. We're going to get an easement. So by imminent domain, and that's the government's right. And then if the land owner does not agree, then the litigation to exercise that right by the government is called condemnation. easement termination. So easements can be terminated by express agreements that's by in writing. So giving example, if you had a utility company that has what one scenario I can tell you is that by Kenyan Lake, there's a subdivision where there are five foot easements on the inside, on the interior lot lines for the utility companies for part analysis in GVTC. So in that case, if the owner wanted to replat those, like, they'll say the owner owns two tracks and they wanted to replat those two tracks or doing amended, amended, uh, flat, which is an option in the Comet County, so that they can build a house that crosses the bound, the middle boundary lines of both those tracks. Then you'd contact the, you know, perennials or GVTC and say, hey, are you going to use these easements on the interior lot lines and if not, can I get a release from you? And that's where they can say, you know what, we've looked at our plan, master plan and we're not going to, we're not going to need those easements, so we'll give you a release. So that's one way and that would be by written document and then that written document would be recorded with the county clerk. easement can also terminate by merger and this is where a dominant estate acquires the servient property. So let's say in, um, let's go back to our scenario, we got a 10 acre track divided into two five acre tracks, uh, each purchased by a different individual and then, um, let's say in this case, uh, that the owner put, put an easement in place for the owner of track B to access his property across track A's. Everything was done correctly. And then let's say, you know, three years later, the owner of track A's is, you know what, I'm not going to use this land. I actually bought some other land. So he goes to the owner of track B and says, hey, would you like to buy this land? And so the owner of track B says, sure, I'd like to buy this land. And so now, um, where, where track A was the servient state and track B was the dominant state. Now, the owner of track B owns both tracks. And so now there's no longer a need for that easement to access, um, B's property across track A because B owns both properties. So that's where the dominant state acquires the servient state and it can go the other way to you or the servient state acquires the dominant state. Um, by abandonment, however, you got to look at case law on this because there, there's case law out there that says, even if an easement is not used, that doesn't mean, even if it's not used for 99 years, that doesn't mean that it's been abandoned. So you've got to look at the case law on that to determine how that's defined and how that plays out. Uh, condemnation, uh, through imminent domain. So that's if, uh, you know, the government had an easement, but then the government acquired that property, uh, change a purpose of the easement. So, uh, it could be that an easement was in place for, for a state of purpose. It's always going to be should be of a specific and limited use, but then that use is no longer necessary. Then that easement can be terminated. So one example of an easement in terms of change or cessation of the purpose of the easement, let's say, you know, in a plated, uh, or in a gated neighborhood, uh, there, and if you look in the newer deed restrictions, um, there will be an easement granted to, uh, certain individuals to access, uh, the roads that gives them a right to use the roads. So for example, um, delivery services or any vendors that are, um, providing services for the repair and maintenance of properties in that neighborhood that they're automatically given an easement, uh, or they're given an easement under the deed restrictions. So that they can enter the property and, you know, uh, FedEx or UPS or, or the post office can deliver mail or deliver packages. Or if you have an AC repairman that, uh, shows up, he can, um, drive on the roads, which are private, um, to, uh, to, uh, to visit a house that, uh, there's needing, that where the AC is needing service. So the end, so, um, without, without that right, then, um, each individual would have to give a, would have to grant a license every time for those individuals to enter upon the property to enter the gates of the, of the gate to neighborhood, uh, and then drive on the private roads. So the easement satisfies that, uh, that, uh, condition. But let's say then the, the subdivision decides that we no longer want this to be a gate to neighborhood. We're tired of maintaining the roads. We just want to turn this over to the city or to the county. And so once that happens, the gates come down and now those become public roads. So now the purpose of that easement is no longer, uh, necessary. We also have destruction of an easement structure, such as a, uh, let's say if you had a fence that, uh, was the, it was part of the easement. The party wall we mentioned earlier and then that fence is destroyed. Um, now, you know, the, the, the whole purpose was that fence itself that structure, then, um, that easement could be, could be terminated and then non use of an easement by prescription. Um, that's if you, uh, if you've used that easement, um, for a certain period of time, but then stop using that easement. Uh, so an example of that would be if that, if the owner of track B had driven across that track of land, um, but then passed away and the airs had not access that property for, uh, you know, significant period of time, then that could affect the, the, uh, potential calls of action or the claim of a prescript of easement in that case. We have encroachments. So encroachments are the intrusion, actually the unauthorized physical intrusion of one owner's real property into that of another. So we talked about encumbrances, which is something that burdens interest in the right to real property that limits the owner's interest in their property. And so it's something that burdens that owner's property. And so an encroachment is a type of encumbrance. So an encroachment is the unauthorized physical intrusion of one owner's real property into that of another. And so one example would be a fence. That's generally what you see all the time is there is a fence. The neighbors fence is six inches inside your property line. That would be an encroachment. Another would be if a neighbor accidentally built their house across the property line into your property. And that does happen sometimes. Then that would be an encroachment. Another example would be a tree limb hanging over the boundary line into the neighbor's property. So these interfere with the right to the owner's use and enjoyment of that property. With the example of the tree limb that violates the airspace, the fence, and the driveway that were mentioned are on the surface. And they can have an impact or a negative impact on the property's value. If you're buying acreage, for an example, let's say you're buying 300 acres. And in a number of places that fence is off to where it actually is only 290 acres. Well, that's 10 acres at, let's say, $10,000 an acre. So that's $100,000 in valuation right there. So that could impact the value of the property based on that fence not being in the correct location. Or it's being, it's on your property. And if it's been there for significant period of time, then that could create some legal issues. These will not appear of record on title. Generally, you'll discover encroachments either by survey or by visiting the property and doing a visual inspection of the property. And owner may have to go, may have to resort to litigation. To remove encroachment from the property. So let's say the the neighbors can agree on where the fence is supposed to be. Even though there's a survey and that survey says this is where the fence line is, the neighbor says, nope, I've had my fence there forever. And you know, I'm claiming a right of adverse possession in your property. Then it may require litigation to resolve that issue. Now talking about licenses, a license of the definition of an easement is the right to use another's property for a limited specific purpose. And we the definition of a license is the same thing. The right to use the property of another for a limited specific purpose. The main distinction between the two are easements will run with the land. So they stay, they stay in effect. Some of that property sold, they don't go away. The only exception would be the personal easement that we mentioned earlier, the personal easement in gross. That's a personal right. But with the license, well, so the easement's run with the land so they don't just go away. And you can't just terminate an easement at will other than the ones we mentioned in the outline. So that's a distinction between the distinction between easement and a license is that a license does not run with the land and a license is revocable. So that's the main thing as a license is revocable. So for an example, a farmer granted a neighbor permission across his land to fish and his pond is an example of a license. If you ever see there's billboards, you may see advertisements before hunting season stars, before divot hunting season stars. It says, hey, we do day hunts for extra dollars per day. That's going to be a license. That's going to your pain, if you're paying, say $60 for the day, then that is a your pain for that right to enter upon that individual's property for that day for a certain time period specifically to divot and that's it. That doesn't give you the right to come back the next day in hunt. That doesn't give you the right to enter upon the property and fish. It's for that specific and limited purpose. So generally, and then licenses are generally not transferable. So you don't transfer, you can't transfer the right. There's some exceptions of that, but that's general that's a general statement that they're not transferable. And then they can cease upon the death of either party or on the sale of a property where property is involved. So giving example of a license to examples. One, if you buy a ticket to go to a spurs game at the AT&T Center, that's a license. Another example would be if you buy a movie ticket. That's a license. Now it will use to get the physical tickets. That's not always the case anymore. So if you ever get a physical ticket, look on the back and see what it says. And tell you, it's going to say that this license is revocable, which means that they can terminate your right to enter upon that property. Now when you buy that ticket for the spurs game or for the movie theater, you're buying, that's for a limited and specific purpose to use the property of another. So you're buying the right to enter upon either of those venues either the AT&T Center or the movie theater on that day for that movie or for that spurs game. And that it may have a start time. So let's say both the spurs game and the movie theater 7 p.m. just keep this simple. So you can generally enter the property a little earlier and they'll have rules in terms of how early they open. So you can't show up at noon and sit there all day. So usually it's going to be an hour or so, maybe maybe two for the spurs game. And then for the movie theater, you're usually showing up maybe, you know, there's usually another movie that's ending. So wherever that time buffer is, you know, or they may need to clean the theater, then you can enter the movie theater. And then when that movie is over, you're expected to vacate at the theater right then and there. You may have a minute or two after, you know, the final credits have concluded, but you're expected to vacate the movie theater. And with the spurs, they're going to have a closing time where they want everybody out. And so you're not going to be able to hang out, you know, until two or three a.m. or you're expected to leave the property. So, so that's those are some examples of licenses. Then we have deed restrictions. So a deed restriction is a limitation imposed on a buyer's use of property. And it's generally going to be in a platyth sub division. And it's generally going to be outlined in the CCR's, the Covenants, Conditions and Restrictions, or what we also call either D restrictions or restrictive covenants. And this is generally going to be applied when you have a platyth sub division. Now you could, as a property owner, put restrictive covenants on your property when you go to sell it. Let's say you own a ten acre track of commercial property. And that you, you include as part of the contract negotiations. And then also in the deed, a statement that the property cannot be used for, you know, fill in the blank. You know, it cannot, it cannot be used for, oh, you know, I can't think of anything right off here. Just, just thought of something. So if you, here's a perfect example, HB owns a track of land. They bought tracks of land. And they want to, they finally developed, they built out a store. They built out a shopping center. So they have these tracks of land that they're not going to need anymore. But they're within the market area, the trade area for that store where their customers are coming from. So they don't want another competitor being built on those tracks of land, because that would directly interfere with their use of the property. So then a stipulation is made as part of the contract negotiations. And then also in the deed, or it can be put in place before the property is sold with restrictive covenants, stating that that property cannot be used for. And it's going to be more than a grocery store. But it's going to say grocery store. And it's going to be an expansive paragraph that includes the, the business items that HB is engaged in. So that way, they don't have a competitor buying property from them and then building a store and then directly competing. All right, so next we're going to cover leans and we're going to look at lean types, lean priority, superior leans and junior leans. So a lean is a creditors claim against personal or real property as security for a debt of the property owner. So a lean is a creditors claim against property or real property as security for a debt of the property owner. It is an incumbrance, so a lean is an incumbrance that restricts free and clear ownership by securing the lean property as collateral for debt. A lean will reduce the owner's equity in the property to the extent of the lean amount. So what that means is if you have a house that's worth $100,000 and there is an $80,000 mortgage on that property. So in this case in Texas, you'd have a promissory note in the amount of $80,000 and then you would have a deed of trust that is signed by the owner of that property which grants the lender a lean or security interest in that property for the amount of the debt, which in this case is $80,000. And so if the owner fails to pay on that promissory note, then one of the remedies the lender has is what we call the mortgage under that deed of trust is the ability to foreclose on that property. And so in this case, if property is worth $100,000 and there is an $80,000 lean on that property, then the amount of equity in that property is $20,000. So a lean will reduce the owner's equity in the property to the extent of the lean amount. So the creditor is the lean or which is the, there are going to be the lender, the bank, the debtor is the leanee. So a lean does not convey ownership with the exception of a mortgage lean. Now in Texas, we have a, what we have, we use a deed of trust instead of a traditional mortgage. So the owner receives title through a deed and then grants the lender a security interest in the property through the deed of trust. So a lean attaches to the property and a property may be subject to multiple leans. So you could have a, what we call the first lean or the purchase money lean, which is the, there's a loan that is used to buy the property. And then there's a security interest that is granted to the, to the lender. So we call that a purchase money lean. But then the, the owner may come back later and want to take, want to borrow against the equity in the property. And so in that case, the owner would apply for home equity loan and then the bank would put a second lean on that property. So the purchase money lean would remain in place and then the home equity lean would come in second or it would be referred to as a junior lean. So the purchase money lean has lean priority, which means it comes in first place. Another example is if you had a, a borrower that was applied for a conventional loan and of course the requirement there is, is generally going to be 20% equity in the property. But in this case, the borrower doesn't have 20% equity in the property. But what they're going to do is what they've structured is a purchase money lean for, with an 80% LTV. So let's, let's take the $100,000 purchases and example. So the purchase money lean would be 80,000. So that would be the first lean. And then the, it could be a second lean that is issued simultaneously for a second loan in the amount of let's say 15%. And then the borrower would be required to bring 5% to the table of the down payment. So in this case, the purchase money, or the lean or or the mortgage with the first lean status, the purchase money lean status has effectively 20% equity in the property. So their, their risk is minimized. And then the second loan, second lender has a 15% risk in that property as a junior lean holder. And that lean is subordinate to the, it's going to be subordinate to the first lean, to the purchase money lean. And then the borrower brings 5% to the table. So property may be subject to multiple lean. A lean terminates on payment of the debt and recording of documents. And so in Texas, what we would record is a release of lean. And then what that does, what we, in the, what we call the chain of title, think of it like a puzzle, only it's sequential is that, that that a release of lean would be filed or the release of leans would be filed with the county clerk. And so what you would have is a deed, deed of trust. And then there would be, there could be subsequent documents filed. But then what we would have is a release of lean that matches back up with one or more deeds of trust. So you have, you could, if you have one release of lean, it matches up with a deed of trust. If you have multiple releases of leans, then they match up with multiple deeds of trust. And then that provides guidance in terms of, or assurance that that note was paid in full and that property is no longer subject to being collateral for a debt. There are lean types. So we have a voluntary lean, which may be created by an owner to borrow money or some other asset secured by mortgage, so it would be a purchased money lean. An involuntary lean is a legal process that places a lean against a property regardless of the owner's desire. So that's an involuntary lean. So an example of an involuntary lean is homeowner, enters into a contract for work to be performed on, on their property. And then the homeowner does not pay. Then the, in this case, either a contractor, or a general contractor, or a subcontractor can file a, we call it, "Materialments and Mechanics" lean on that property for either labor goods or supplies or materials that are provided for the improvement of that property. And so in that case, while it's not a, what we would call a traditional lean, it is an lean, "Comberts on that property," we call it an affidavit claiming a lean, or "Materialments and Mechanics" lean. So that would be an example of an involuntary lean that is placed on the property. So the owner did not sign a document granting a security interest in the property to, to the general contractor or the subcontractor. A general lean is one placed against any and all real and personal property owned by a particular debtor. So think of that like a, it's an umbrella. A superior or a senior lean ranks above the category of inferior or junior leans. Meaning superior leans receive payment first. That's what I was mentioned earlier with either the purchase money lean and the home equity lean or purchase money lean. And then a junior lean is part of the same transaction, it's part of the same purchase. Priority of leans is established by categorization. So we either refer to it as a superior inferior. And then we look at the date of the recording of that lean to determine which lean has priority status. Some examples of superior leans that come into play. We have automatically we've got real estate tax leans those automatically come first. So even if you have a, a deed of trust that has first lean status as a purchase money lean on that property or real estate tax lean will always come in, will always trump. Let's call that way. That's referring to that as a domino term. Will always, will always be first in line. Same thing with any a special assessment leans assessed by the government and then any federal or state taxes. And so there's a tax lean that is filed and then that would be superior. And then we have other leans such as, you know, you've got hospital leans, you've got mowing leans, you've got other state tax leans that come into play such as sales tax, franchise tax, well, franchise tax. I mean, sales tax would be an example or non payment of workers comp. So generally that's going to, that's going to be filed against an individual. And then as part of real estate transaction, the title company will conduct a search on the seller's name to ensure there's no outstanding judgments or debts that are out there that would have to be satisfied from the proceeds from the sale of that transaction. And then we also have the mortgage or deed of trust leans. A vendor's lean, so continue on lean types of vendors lean secures a purchase money mortgage. So which is a seller's loan or a loan not to sell a loan to a buyer to finance a seller for property. And so we have as part of a transaction, if you residential transaction in Texas, if you buy a residential property, you would generally get a deed, warranty deed with a vendor's lean included. as part of that purchase and then you'll also have a promissory note which is an agreement to pay on the debt and then you'll have a deed of trust which is a security agreement in which the property is used as a collateral for that debt and so there are two ways a lender can seek recourse against a borrower the first is if the borrower fails to pay on the note they can exercise their rights and remedies under the deed of trust and foreclose on that property and we'll talk about that here in a minute the other option is to follow a lawsuit under that vendor's lien which is effectively like a breach of contract and then pursue attempt to pursue a remedy for non-payment of the debt that way more times than not the lender will exercise its rights under the deed of trust because the borrower a borrower often does not have any collateral outside of the property to satisfy any judgments we also have a mention like municipal municipality leans so municipalities may place a lien against a property for failure to pay certain bills such as if the property's not been mowed and the grass is getting where the weed are getting way too high and the owner has been notified by the city to remedy the issue and the owner does not then the the city could hire a third-party company to mow that property and then follow a lien against the property for the amount of that debt and then I also mentioned the mechanics lien which secures the cost of labor materials and supplies in relation to real property improvements so now talking about the foreclosure process or the foreclosure so we have foreclosure is either a judicial or a non-judicial process depending upon the type of lien depending on the type of debt so we judicial foreclosure occurs in states where there's a two-party mortgage document that does not contain a power of cell clause and that's what we're looking for so in Texas the D of trust includes that power of cell clause which allows the the debtor which allows I'm gonna strike that not the debtor which allows the lender to foreclose on that property to satisfy the debt to associate with any default so if the borrower fails to meet any obligations under the loan and that's not just payment of the debt but that can also be payment of taxes by maintaining insurance on the property maintain a repair and upkeep of the property then the lender can accelerate the loan and with the judicial foreclosure the lender is going to be required to follow lawsuit and go to court and get a court order approving the sale of that property then the lender would proceed with the foreclosure sale which is selling the property on the courthouse steps that process is also very similar for a tax sale so in a tax suit where property owner has not paid the taxes then a lawsuit is filed against the property and we call that an in-rim proceeding which means it's against the property and then the owner is also served just as a matter of fact because they own that property but it's not a lawsuit and a tax suit is not a lawsuit against the individual whereas a judicial foreclosure would be a lawsuit against the borrower and then once the court orders obtained either in a judicial foreclosure or in a tax suit then the either the bank or the government can proceed with a tax sale under under state law and in Texas that's going to fall under the Texas property code the requirements for the foreclosure sale are outlined and the process are outlined in the Texas property code. If we look at the non-judicial foreclosure and that case in Texas the lender or the lender's attorney generally what you have the process where the borrower has not paid they get a notice from the banks and how you haven't paid pay you know make sure you make your payment and then second payments missed you know the next month and then another payment has been missed and so generally at that time it's kicked over to the collections department with the bank and so you may still have the servicing side contact in the borrower and then the collections side contact in the borrower so those are two different sides and then somewhere usually around there the the bank will contact their attorney and and notify them and then the attorney will start their process so we're already three or four months in at this point of a default so if you imagine the note in the tax an insurance escrow or just the tax escrow is you know two thousand twenty five hundred you know after you know four months that that number can jump pretty high so that you could be up to ten thousand dollars in some instances right there just after a four months of default and so then the the lenders attorney sends a what we call a twenty-day right to cure letter and that notifies the borrower that they're in default and and then what they owe and they've got twenty days to pay that debt and it's usually stipulated you know by five o'clock on this date sometimes the lenders attorney will with approval their client will allow thirty days to pay that debt but part of that also depends on the next step which which is if if the borrower has has not satisfied that requirement of paying the the not only the debt that's owed and then late fees you know the mortgage payments in the late fees but then also the attorneys fees at this point then the next step is to provide notice of the foreclosure to the to the debtor to the borrower and then so now in Texas the the borrower must be or the debtor must be notified at least 21 days prior to that foreclosure date and so the foreclosure in Texas occur on the first Tuesday of each month so you've got to make sure that timing works out depending upon if you if you can give that twenty to twenty one day notice and that falls before the the the next first Tuesday of the of the month otherwise you may have to postpone it for another month so you could be in at this point you know you could be up to five six seven months now if you're if you're four months in default you give a twenty day right to you send out the twenty day right to cure letter and then you've got to wait the 21 days you could be in to you know month six or seven at this point before you actually go to the foreclosure sale and then the foreclosure sale the attorney will conduct the foreclosure generally will conduct the foreclosure sale on behalf of the bank and then we'll either the bank will you take that property back if there is no bid or nobody with the highest bid that's acceptable to the lender otherwise if there is a bid that is acceptable to the lender or there are there is a bidding contest then the party for the highest bid will then pay for the the amount bid at foreclosure think of it like an auction and then we'll receive a deed if there's a if there's a lawsuit associated with the property then a list pendants can be filed and the list pendants gives the public notice that the property that a lawsuit has been filed in relation to the property and so there's ongoing litigation and it could have a judgment against it at some point in the future and so that document is filed with the county clerk and the property in the county which the property is located a rid of execution is a court order that authorizes an official such as a county sheriff or a constable to seize and sell the foreclose property that would be in certain states that the require that as part of their process we don't have that in Texas for our purchase money leans now the for tax sales the sheriff is the individual responsible in that county for signing the deed over in relation to tax sales but not not mortgage foreclosure sales or deed of trust foreclosure sales in Texas so I've kind of walked you through the process if if there if there is a sale of the property that is below the amount that the the lender is owed then there's what's called referred to as a deficiency and so the lender may seek may go after the the debtor for that deficiency and that would be through legal process the right of redemption grants or it gives the bar with a right to reclaim a property by paying off the amounts owed including interest and cost and any other fees and so in Texas that right exists up to the day of foreclosure and so the foreclosure begins at 10 a.m. or either 1 p.m. generally the foreclosure between 10 and 10. 4 p.m. in Texas on the first Tuesday of the month, so 10 a.m. and 4 p.m. and then you have to four clothes within, if I remember correctly within three hours from the date stated in the notice of posting for that four clothes. So if you say 10 a.m. you must conduct the four clothes yourself between 10 a.m. and 1 p.m. and if you say it's 1, it's going to be 1 p.m. then it must, like four clothes yourself must be conducted between 1 p.m. and 4 p.m. It doesn't have to be exactly that, but generally that's what you see that way the attorney has a window in which to conduct the four clothes you're sale. And so if a bar or could pay all the amounts owed,