Encumbrance

An encumbrance is any claim, right or restriction affecting property that belongs to someone other than the owner.

It is the broader category. Every lien is an encumbrance. Most encumbrances are not liens.

The two families#

Financial encumbrances secure a debt: mortgages, judgment liens, mechanic's liens, tax liens, assessments. These affect value and generally have to be cleared to convey with clear title.

Non-financial encumbrances restrict use rather than securing money: easements, restrictive covenants, leases, encroachments, licences.

These affect use. They do not usually prevent a sale, and they follow the property permanently.

Most property has several#

Which is worth saying, because the word sounds alarming.

A typical Minnesota house carries a mortgage, a drainage and utility easement along its lot lines, subdivision covenants, and possibly a lease if it is tenanted.

None of that is a problem. It is the ordinary state of real property, and none of it makes title unmarketable.

What does cause trouble#

Unreleased liens that should have been discharged.

Gaps in the chain — an unprobated estate, a missing conveyance.

Encroachments, where a structure crosses a boundary.

Easements of uncertain scope, where the recorded document does not clearly define the route, width or permitted use.

Undisclosed leases, particularly on Torrens property, where the rights of persons in possession under a deed or contract for deed from the certificate owner survive under Minn. Stat. 508.25 even without a memorial.

Reading them#

Encumbrances appear on the title commitment as Schedule B exceptions, with recording references.

The commitment tells you an easement exists. The recorded document tells you whether it is a two-foot strip along the boundary or a fifty-foot corridor through the middle of the buildable area.

Pulling those documents is the substance of title review, and it costs the price of a few county copies.

Which exceptions can be removed#

Standard exceptions — parties in possession, mechanic's lien rights, survey matters — can frequently be removed by supplying a survey and a seller's affidavit.

Specific exceptions found in the record generally cannot. The question then becomes whether to accept them, which is a decision to make before closing rather than a discovery to make afterwards.

Encumbrances a search will not find#

The category title insurance exists for.

Unrecorded leases, particularly short ones. On Torrens property, leases of three years or less with actual occupation survive under Minn. Stat. 508.25 without appearing on the certificate.

Rights of persons in possession, which on registered land bind a purchaser under the same provision.

Unrecorded easements established by prescription or necessity, which exist without any document.

Mechanic's lien rights not yet filed but still within the 120-day window.

Each is a real interest in the property that a careful search of the record cannot reveal. Which is why an owner's title policy is doing work the search cannot, and why declining it on a property with an occupant or a recent construction history is a poor trade.