1.4 Land-Use Controls, Public & Private Restrictions, and Encumbrances

Land-Use Controls and Encumbrances

Ownership is never absolute. Government powers and private agreements both limit how land may be used. The four public powers are summarized by PETE: Police power (zoning, codes, environmental rules), Eminent domain (taking for public use with just compensation), Taxation (property taxes; nonpayment leads to a tax lien/sale), and Escheat (property reverts to the state when an owner dies with no heirs or will).

An encumbrance is any claim, lien, or restriction held by someone other than the owner that affects title or use. Encumbrances split into liens (money claims) and non-money burdens (easements, deed restrictions, encroachments).

Public controls: zoning and takings

Police power lets government regulate without paying the owner, so long as the rule serves public health, safety, or welfare. Tools include zoning ordinances, building codes, and master plans. Relief mechanisms:

• Variance — permission to deviate from a zoning rule due to hardship.
• Special-use (conditional-use) permit — allows a compatible use (a church in a residential zone).
• Nonconforming use — a pre-existing legal use "grandfathered" after zoning changes.
• Spot zoning — illegal reclassification of one parcel inconsistent with the area.

Eminent domain is the power; condemnation is the process; inverse condemnation is when an owner sues because a regulation goes so far it amounts to a taking. Eminent domain requires just compensation and a public purpose.

Private controls and easements

Private controls run through deed restrictions and CC&Rs (covenants, conditions and restrictions), often enforced by an HOA. When a private restriction is stricter than zoning, the more restrictive control wins.

An easement is the right to use another's land for a specific purpose:

An encroachment is an unauthorized physical intrusion (a fence over the line); a license is revocable permission and is not an encumbrance.

Liens and priority — worked example

A lien is a charge against property as security for a debt. Specific liens attach to one property (mortgage, mechanic's, property-tax, vendor); general liens attach to all of a debtor's property (judgment, federal income-tax, estate). Liens generally pay in order of recording ("first in time, first in right"), but property-tax and special-assessment liens take priority over all others regardless of date.

Worked example: A property sells at foreclosure for $300,000. Recorded claims: property taxes $12,000; first mortgage $250,000; a judgment lien recorded later $60,000. Pay tax first ($12,000), then the first mortgage ($250,000) = $262,000, leaving $38,000. The $60,000 judgment receives only $38,000 and is short $22,000 (an unsatisfied deficiency). This priority rule is heavily tested.

Easement creation, termination, and the appurtenant pair

In an easement appurtenant there are always two parcels: the dominant estate benefits (it holds the right) and the servient estate is burdened (it gives up the use). The right transfers automatically when the dominant parcel sells, even if a new deed never mentions it, because it "runs with the land."

Easements terminate in several ways the exam likes to list:

• Merger — one party acquires both the dominant and servient parcels.
• Release — the dominant owner releases the right in writing.
• Abandonment — clear non-use plus intent to give it up.
• End of necessity — a necessity easement ends when the landlock is cured (e.g., a new public road reaches the parcel).

Do not confuse an easement (a non-revocable interest) with a license, which is mere permission and can be revoked at will.

Liens, deed restrictions, and clearing title

Liens differ in voluntariness as well as scope. A mortgage is a voluntary, specific lien. A mechanic's lien (for unpaid labor or materials) is involuntary and specific, and many states let it relate back to the date work began, jumping ahead of later financing. A judgment is involuntary and general.

Deed restrictions and CC&Rs are private and run with the land; if a covenant and zoning disagree, comply with the stricter rule. A restriction that violates public policy (for example a racially based covenant) is void and unenforceable under the Fair Housing Act.

Before closing, an agent confirms title is marketable by ordering a title search and ensuring liens, encroachments, and unreleased easements are cleared or disclosed. An encroachment discovered by survey can make title unmarketable until the parties resolve the intrusion.

Classifying liens at a glance

Expect questions that ask you to label a lien on two axes: voluntary vs. involuntary, and specific vs. general.

Two priority rules dominate: (1) most liens rank by recording date ("first in time, first in right"), and (2) ad valorem property-tax and special-assessment liens jump to the front regardless of when they arose. A subordination agreement can voluntarily reorder priority, for example when a lender agrees to let a later construction loan take first position. Mastering these classifications lets you predict who is paid, and who is left short, at a foreclosure sale.