SHORT INTRODUCTION TO CALIFORNIA REAL ESTATE PRINCIPLES,
© 1994 by Home Study, Inc. dba American Schools
Educational Objectives: Learn about Description by Metes & Bounds, Description by Section and Township, Assessor's Maps, Titles and Estates, Priorities in Recording, Assuring Marketability of Title (Abstract of Title, Title Insurance), Mechanic's Lien, Attachments and Judgments, Easements, Restrictions, Encroachments, Homestead, R. E. TERMS GLOSSARY, INDEX.
When buying and selling real estate, parties must know exactly what constitutes the physical boundaries of a parcel of real estate. Thus, a legal description of a property is a necessary element of the real estate sales transaction.
A proper description of real property is one that will hold up in a court of law, and is therefore legal, and that will allow a reasonably knowledgeable person to locate and determine the physical boundaries of a parcel of real estate. The three accepted methods for legally describing property are:
- metes and bounds;
- government rectangular survey system, and;
- subdivision lot and block of a recorded plat map.
Note that a street address is usually not sufficient as a proper and legal description because it does not adequately define the physical boundaries of the property.
The system of metes and bounds is the oldest method for describing property. Metes are measures of distance such as inches, rods, feet or yards; bounds are natural or man-made landmarks or monuments used to locate the property. Used most often in rural areas, this method describes property by defining its boundaries and the distances and directions between them. A metes and bounds description starts at a point of beginning and then indicates the direction of the boundary line and the distance to each monument around the perimeter of the property back to the point of beginning.
A tract of land beginning in X County would be described as follows: Beginning at the intersection of the east line of Dobbs Road and the south line of McClennan Drive; then east along the south line of McClennan Drive 1200 feet; then South 15 degrees East 220 feet to the center line of Hogtown Creek; then northwest along the center line of Hogtown Creek to its intersection with the East line of Dobbs Road, then north 110 feet, along the East line of Dobbs Road to the point of beginning.
The description must always close by returning to the point of beginning so that the parcel of property will be fully enclosed. When used in urban areas, the metes and bounds method makes reference to streets and other man-made improvements instead of naturally occurring landmarks.
If there is a discrepancy between the actual distance to a stated monument and the linear distance, the actual distance to the monument will prevail. A parcel can be described accurately regardless of what happens to monuments provided there is a fixed, permanently identifiable point of beginning (POB), such as a reference to sections, townships, or ranges from the Governmental Survey System.
Permanent reference marks (PRM) or bench marks are located throughout the country to aid surveyors in work involving elevation and altitude. A bench mark is a reference point of known elevation and location established by the U. S. Geodetic Survey, and usually identified by a marker of stone or other durable material permanently fixed in the ground. Where there is no datum (assumed point) in an area, surveyors may begin at an established bench mark for location and elevation.
Created in 1785, the government rectangular survey system (GRSS) uses a grid system imposed on a map of land to locate and describe a parcel of property. This method begins by dividing land with north-south lines called principal meridians and east-west lines called base lines. These lines are located by reference to longitude and latitude. The intersection of a principal meridian and a base line is known as an initial point. All land descriptions are referenced to this point.
Running parallel to a principal meridian are range lines, spaced at six-mile intervals to the east and west of the principal meridian. Township lines run parallel to a base line and are spaced at six-mile intervals to the north and south. These township and range lines compose a grid consisting of six-mile squares, known as townships, on a map. The second township south and the third township east of the initial point would be referenced as T2S, R3Eas seen in Figure 2-1 at the end of this chapter.
Once a township has been defined, it is further divided into 36 parcels, each one-mile square. These one-mile square parcels are known as sections. Each section is composed of 640 acres. Note that the numbering of the sections begins from right to left from the upper right hand corner and continues right to left, then down and left to right, until all 36 sections are identified.
The GRSS would identify the section highlighted in Figure 2-2 at the end of this chapter as Section 10, T2S, R3E of the principal meridian and base line.
From here it is relatively easy to subdivide a section using a system of directions and fractions. In the Figure 2-3 at the end of this chapter section 10 has been divided into four quarters and further divided to illustrate the ease with which this system can be used.
An alternate way to describe real estate, used primarily in urban areas, is by reference to a recorded survey, called a plat map. Plat maps are prepared by developers seeking to subdivide land. The map includes a detailed description of the subdivision showing the arrangement of the lots and blocks, streets, sewers, water mains, easements, green space, parks, and other physical features. Each lot and block is assigned a number or letter and the exact dimensions of each lot are noted on the plat. If the proposed subdivision is approved by the appropriate local agency, such as the planning board, then the plat map is entered into the Official Records of the county where the land is located.
In describing real estate with this method, the lot and block number, name of the subdivision plat are used, as shown in Figure 2-4 at the end of this chapter.
Lot 5, Block 4 of H Trails Subdivision, as shown in plat thereof recorded in Plat Book 2, page 10 of maps, City Y, in County X, California.
A lot and block description that is not part of an approved and recorded plat map is not an accepted legal description. An owner of a lot in an unrecorded subdivision, therefore, has no verifiable way of identifying or locating the property.
The plat will reveal the shape of each lot in relation to other lots, and all lots and blocks will be numbered. The main essentials are
1. A definite starting point, clearly set out, with the corners marked accurately with permanent monuments set out on the plat. The plat corners must accurately fit the tract of land.
2. A careful and accurate survey of the tract into streets, parks (if any), lots, alleys and the placing of permanent stones or iron stakes at the corner of all blocks and similar stakes at the corners of lots.
3. Platting of the subdivision on paper showing all blocks, lots, streets, alleys, etc. The exact size or dimension of each lot, block, alley, or street, and any other information which in after years may be of assistance in definitely locating any property in the subdivision.
The plat must be executed and acknowledged by the owner with streets, parks, etc., dedicated to the public. After the plat has been filed, it can not be rescinded or vacated without all of the property owners in the addition joining in the vacation, or unless a successful suit filed in the District Court asking for a cancellation or vacation of the plat. Original additions or parts thereof are sometimes later resubdivided or amended. For instance, the size of the lots are changed or made to face a different direction. An amended plat or resubdivision of less than the entire original addition, however, will not have the effect of waiving or changing the restrictions in the original plat. The legality of such replats, amended plats, or re-subdivision is often questioned by attorneys, and frequently a lot will be described in more than one way or by metes and bounds description to cure such objections.
Public records are maintained in every city, town, and county in the United States. They are generally maintained in each county seat. These records serve to establish legal ownership of real property, give notice of encumbrances, and establish the priority of liens.
Placing a document in the Official Records is known as recording. Note that any instrument affecting title to real estate, such as a deed or mortgage, should be recorded as soon as possible to give constructive notice to all persons of the grantee's or mortgagee's interest in property. Constructive knowledge is presumed of all persons, by law, as a result of recording documents, such as deed and mortgages, in the Official Records. This differs from actual notice which is given by legal possession of real property or by handing the person a copy of the document. As a general rule, priority of interests is established according to the sequence, or time, of entry into the Official Records.
Both the obligation and benefit of recording a new deed go to the grantee, or new owner. The grantee must record the deed as soon as possible to avoid a situation where the grantor sells the property a second time to another buyer. If Buyer Two, without knowing of the sale to Buyer One, were to record his/her deed before Buyer One, Buyer Two would have a superior claim of ownership. Buyer One's only recourse in this event would be to sue the seller in court for fraud. The time, expense, and aggravation can easily be avoided by prompt recording of a new deed.
Types of Official Records
Licensees must be familiar with several types of public records to provide clients with the best possible service.
The alphabetical index lists all recorded documents according to the last name of the parties. Typically included is an abbreviation of the type of document, the date it was recorded, the book number and page number in which it is recorded, and a very brief description of the property, such as in what range, section and township it is located, or the subdivision lot number. Such overall indices have generally replaced the grantor-grantee and mortgagor-mortgagee indices. Knowing the name of either party, a broker can find all records in that person's name. For instance, John Black sold his home to Sally Green. Knowing the last name of either the grantor or grantee will enable the broker to initiate a title search. Upon finding the grantee, the broker searching the records can find the grantor, the date of the transaction, and type of transfer. A look at the recorded document will provide further information such as complete legal description, amount of taxes paid, and restrictions. Plat books allow the broker to locate a particular lot in a subdivision, its size, the features of the other lots, most easements, roads, the name of the original developer, and surveyor.
A tract index, sometimes referred to as a lot and block index, lists deeds and other documents affecting title to property according to legal description rather than by the names of the grantor and grantee. In urban areas, knowing the name of the subdivision in which a property is located starts a search using this index. On the other hand, plat maps of a subdivision include a unique number for each block with the lots on that block assigned their own numbers. From there one can readily look up the lot description in the index. In rural areas the legal descriptions contained in the tract index are most frequently classified according to the Government Rectangular Survey System by township and section.
A search of the chain of title using the tract index is easier than using the alphabetical or grantor-grantee index because all transactions related to a specific parcel are recorded on the same page. The disadvantage of the tract index is the difficulty and expense in maintaining it. Note: Local governments seldom maintain a tract index due to its expense; such indices are commonly found in private title and abstract companies.
(The following reprinted by permission from the CalBRE Reference Book, p. 74-80, 83-85.)
California's Principal Base Lines and Meridians
California has three base lines and meridians. They are the Humboldt Base Line and Meridian, located in the northwestern part of the State; the Mt. Diablo Base Line and Meridian, located in the central part of the State, and the San Bernardino Base Line and Meridian located in the southern part of the State. Townships are further divided into sections. Each township contains 36 sections, each section theoretically, is one mile square and therefore contains one square mile of land. The township is six sections long and six sections wide and therefore contains 36 square miles. A section may then be divided for the purpose of having a more particular and specific description, into quarter-sections and fractions of quarter-sections.
Due to the spherical shape of the earth, the sections along the north and west boundaries of each township are approximately fifty feet shorter than the south side. Because of this irregularity additional lines called guide meridians are run every 24 miles east and west of the meridian. Other lines called standard parallels, are run every 24 miles north and south of the base line. These guide meridians and standard parallels also are known as correction lines.
In the original government survey system, lakes, streams and other features were sometimes encountered which created fractional pieces of land less than a quarter section in size. These fractional segments were identified by number. The specific lot number then became the legal description for that land parcel and these parcels were called government lots.
Today, the loss of acreage due to township correction lines and unascertainable errors are placed in the quarter sections bordering the western and northern boundaries of the township. These geographical divisions which would otherwise qualify as quarter-quarter sections are also referred to as "government lots." A government lot necessarily does not contain a standard number of acres.
Following, as shown in Figure 2-5 at the end of this chapter, is a township plat showing how each section is numbered, the numbers running from 1 to 36. It will be noted that each numbered section is divided into quarters of quarter-sections, each small square representing the location of a 40-acre plot of land. Typical descriptions would read as follows:
1. Beginning at the NE. corner of SW.1/4 of Sec. 17, thence southeasterly to the NW. corner of the SE. 1/4 of Section 21, thence southwesterly to the SE. corner of the NW. 1/4 of Sec. 29, thence northwesterly to the SW. corner of the NE. 1/4 of Sec.19, thence northeasterly back to the point of beginning.
2. The SE. 1/4 of the NE. 1/4 of the SE. 1/47 and the S. 1/2 of the SE.1/4 of Sec. 10; the SW. 1/4 of the NW. 1/4 of the SW. 1/4 and the SW. 1/4 of the SW.1/4 of Sec.11, the E. 1/2 of the NE.1/4 of Sec. 15; and the NW. 1/4 of Sec.14, excepting the SE. 1/4 thereof.
3. Beginning at the NW. corner of the SE. 1/4 of the NE.1/4 of Sec. 27, thence due east 3,960 ft., thence due south 3,960 ft., then due west 7,920 ft., thence northeasterly in a straight line to the point of beginning.
Method of Locating Tracts on Township Plat
Some examinations given by the California Bureau of Real Estate for real estate broker and salesperson licenses contain problems based on descriptions similar to the foregoing examples.
Note: In working out Example No. 2 above shown in Figure 2-5 at the end of this chapter, the result is depicted in the irregularly shaped figure outlined in the upper right area of the plat. The shaded figure includes parts of Sections 10, 11, 14 and 15. In working out this problem, the following procedure may be used:
Read along to the first break in the description, which in this case is a comma, "The SE. 1/4 of the NE. 1/4 of the SE.1/4", This phrase describes one portion of the area, and reading further you see that it is a part of Section 10.Now go back to the break, the comma, and start back from there. The SE.1/4 (of Sec. 10) locate that. Proceeding back, the NE 1/4 (of the SE. 1/4/ of Sec.10) locate that. Then back the SE.1/4 (of the NE. 1/4 of the SE. 1/4/ of Sec.10) locate that area and outline it as you have now completed the first segment of the entire description. Since this segment is 1/4 of a quarter of a quarter-section (1/4 of 1/4 of 160 acres), you have outlined a 10-acre parcel.
Now following the portion of the description that you have just completed appears the complete phrase "and the S.1/2 of the SE.1/4 of Section 10,".Locate the SE.1/4 (of Sec. 10).Then take the S.1/2 (of the SE.1/4 of Sec.10) and, since this completes the segment, outline that portion which is two complete squares of 40 acres each.
Now you have completed the description up to the first semicolon. Proceeding read along to the new break, again a comma. "The SW.1/4 of the NW.1/4 of the SW.1/4,".Here again you have a complete phrase, and reading on you discover that it refers to a portion of Section 11.Now back to the end of the phrase (the comma) and proceed back from there the SW.1/4 (of Sec. 11)?locate that. Going back the SW.1/4 (of the NW.1/4 of the SW.1/4 of Sec.11). Since this completes the phrase outline this additional 10-acre parcel on your plat.
Now, go on to the next complete phrase which is "and the SW.1/4 of the SW.1/4 of Sec.11."Locate the SW.1/4 (of Sec.11) and outline the SW.1/4 of that. This will add another 40-acre square to your pictured description.
Reading on from the portion you have just completed (from the second semicolon in the written description), you find the next complete phrase "The E.1/2 of the NE.1/4 of Sec.15." Locate the NE.1/4 (of Sec.15) and outline the east 1/2 of that area. Thus, two more small squares of 40 acres each are shaded in on your plat and you have come to the last phrase in the written description which is "and the NW.1/4 of Sec.14 excepting the SE.1/4 thereof." You, therefore, locate the NW.1/4 of Sec.14 and shade the whole of it, with the exception of its SE.1/4, thus adding three more of the small squares of 40 acres each to the area covered by the written description.
The delineation of the described area on the plat is now complete. By adding as you went along, the acreage of the area you have shaded; or by computing the total of complete shaded small squares with any fractional portion thereof and multiplying by 40, you have the total number of acres in the described area. In the problem just presented, the total acreage is 340.
Example. Deed descriptions, in order to eliminate error, usually spell out directions and the fractional part of the section, followed by the abbreviation in parentheses, or vice versa. For instance: The southwest quarter (SW.1/4 ) of the northeast quarter (NE.1/4) of Section 6 Township 7 South, (T.7 S.), Range 14 East (R.14 E.), Mt. Diablo Base and Meridian (M.D.B.& M.).
Lot and Block Descriptions
Under the California Subdivision Map Act all new subdivisions must be mapped or platted. The map shows the relationship of the subdivision to other lands, and each parcel in the new subdivision is delineated and identified. When accepted by county or city authority the map is filed in the county recorder's office and has official status. Afterwards, any parcel in the subdivision is simply described in legal instruments by reference to the tract name or number and block and lot numbers. To this is added, City of , County of .This makes for simplicity in describing property as: "Lot 14, Block B, Parkview Addition (as recorded July 17, 1926, Book 2, Page 49 of maps), City of Sacramento, County of Sacramento, State of California."
Within 90 days after the establishment of points or lines, a land surveyor or civil engineer who has made a survey in conformity with land surveying practices shall file a record of survey relating to boundaries or property lines with the county surveyor in the county in which the survey was made. This record of survey map shall disclose
(1) material evidence or physical change which does not appear on any map previously recorded in the office of the county recorder,
(2) a material discrepancy with information of record with the county,
(3) any evidence that might result in alternate positions of lines or points, or
(4) the establishment of lines not shown on a recorded map which are not ascertainable from an inspection of the map without trigonometric calculations.
The county surveyor, after examining a record of survey map filed with the surveyor's office, shall then file it with the county recorder.
The county assessor may prepare and file in the assessor's office an accurate map of any land in the county and may number or letter the parcels in a manner approved by the board of supervisors. Section 327 of the Revenue and Taxation Code provides "that land shall not be described in any deed or conveyance by a reference to any such map unless such map has been filed for record in the office of the county recorder of the county in which such land is located."
In the absence of a title report, it is often found convenient to refer to a specific parcel of realty by street number, name (e.g., "The Norris Ranch"), or blanket reference (e.g., "my lot on High Street").These methods are legal, but title companies ordinarily will not insure title derived through such a description. Usually the specific boundaries of the grant must be established by one of the formal methods of description as set forth above, before title insurance can be obtained.
If the boundary is a public road, the owner of land abutting on it is presumed to own to the center of the road, but the contrary may be shown.
A deed to a parcel in a subdivision showing a dedicated street adjoining will, unless the contrary intent appears, carry the title of the grantor to the center of the street subject to the rights of the public to the use of the street. Owners of property abutting on a main or public highway have a peculiar right in that highway distinct from the public whether or not they own the fee thereof. Upon vacation, they might still have a right to ingress and egress. Words "except" and "reserving" as used in descriptions of property are not conclusive in determining whether or not the fee title to the portion in question is being conveyed. An innocent looking phrase may be omitted, or the wrong course given, either of which may change the entire complexion of the description and thus exclude property intended to be included, or include property which the party executing the instrument did not own. Although descriptions may fail because of omissions, elaboration can sometimes result in a void or uncertain conveyance.
A recording system was adopted by the California Legislature, modeled after the system established by the original American Colonies. It was strictly an American device for safeguarding the ownership of land. Recording consists of copying the instrument in the Grantee-Grantor Indices and indexing the instrument under the names of the parties.
The Recording Act of California provides that, after being acknowledged, any instrument or judgment affecting the title to or possession of real property may be recorded.
An order, depending upon the specific nature of the order, may be recorded in an:
. index of deeds, grants and transfers (grantor index);
. index of deeds labeled "Grantees";
. index to transcripts of judgments labeled "Transcripts of Judgments";
. index of attachments labeled "Attachments";
. index of notices of the pending of an action labeled "Notices of Actions"; and
. indices labeled "General Index of Grantors" and "General Index of Grantees".
The word "instrument" as used in the Recording Act means "some paper signed and delivered by one person to another, transferring the title to, or giving a lien on, property or giving a right to a debt or duty." (Hoag v. Howard, 55 Cal.564.) Instrument does not necessarily include every writing purporting to affect real property. Instrument does include deeds, mortgages, leases, land contracts, deeds of trust and agreements between or among landowners.
Purpose of Recording Statutes
The general purpose of recording statutes is to permit, rather than to require, the recordation of any instrument which affects the title to or possession of real property, and to penalize the person who fails to take advantage of the privilege of recording. The recording statutes are intended to provide that instruments affecting title or possession to real property will be recorded in a public office so that purchasers and others dealing with the title to property may in good faith find out about and rely upon the ownership of the real property as shown by the record of instruments recorded in the designated public office. The Recording Act does not specify any particular time within which an instrument must be recorded. Time of recording is of course very important to the bona fide purchaser and/or lender since the purchaser or lender is protected only by properly using the recording statutes.
As between conflicting claims to the same parcel of land, priority of recordation will ordinarily determine the rights of the parties. Instruments affecting real property must be recorded by the county recorder in the county within which the property is located. If the property lies in more than one county, the instrument, or certified copy of the record, must be recorded in each county in which the property is located in order to impart notice in the respective counties. If it is necessary to record a document written in a foreign language, such as Spanish, the recorder must permanently file the foreign language instrument with a certified translation attached. In those counties in which a photographic method of recording is employed, the whole instrument, including the foreign language instrument and the translation thereof, may be recorded and the original instrument may be returned to the party who has left it for recording.
(End of CalBRE Reference Book excerpt)
The only true "evidence of title" is the county's records. The purpose of recording any instrument is to give notice to the world of the transaction. Recording a deed or any document that affects ownership in land is not compulsory, but is a right of the holder. If such documents are recorded, the chain of title continues on record .
The recorder will note on the instrument the filing number and the exact time at which the document was filed, including the year, month, day, hour, and minute that it was received. The contents of the document are then reproduced and filed in the appropriate book of records. The original instrument is returned to the person who left it to be recorded. The recorded instrument is a matter of public record and anyone desiring to examine information regarding a particular parcel of property may do so by visiting the county courthouse where the document is recorded .
Present interests in real property are protected if documents affecting the title are recorded. All subsequent recordation of instruments affecting the same property will be subordinate to the right of the present interest holder. Recordation of subsequent interest in real property protects the interest against claimants whose interests have not yet been recorded. This conforms to the general recording maxim, "first to record is first in rights." Known as the race notice concept, the first to record wins the "race to the court house."
A properly executed deed is effectual between the parties without recording, but in order to be effectual against all the world, it must be recorded in the proper office. Though no more used in California, the Torrens system of evidencing title is used in several states. The system is such that, at any time, the original certificate of title will reveal the names of current owners and encumbrances (such as mortgages and judgments) recorded against the real property. Those states which have adopted the Torrens system have continued to maintain public records so that persons wishing to continue the traditional form of title substantiation may do so.
Title recordation acts as a means of protecting title to real property against all persons who may later claim a right against the property. Recording is constructive notice to the world, a legal presumption that everyone has been informed of the existence and content of the document.
A chain of title is a record of a property's grantors and grantees, linking one owner to the next throughout the legal history of the parcel of land. Whenever the link is broken or unclear, a cloud is created and there is a flaw in the title. All recorded instruments affecting a parcel of real property are a part of the chain of title, indexed in the order of their actual occurrence.
As recorded documents are extremely difficult and time-consuming to examine, the major evidence of title has become the abstract. To the average purchaser, the abstract affords no knowledge of the state of the title to the real estate. An attorney's opinion is needed to inform the prospective purchaser of the nature of the seller's title and of any defects, liens, encumbrances, or other rights which might be disclosed by the abstract.
All counties in the state provide for the recording, in a public office, of every document by which any estate or interest in land is created, transferred, encumbered, or otherwise affected. These public records furnish a reliable history of the title or ownership of the tract of land. The abstract of title is a summary or a copy of every recorded instrument affecting the title to the tract of real estate covered by the abstract and is compiled by a duly licensed abstractor who conducts a title search. If covered by the abstractor's certificate, "filed" instruments which are not technically recorded instruments may also be included. These are such documents as security agreements, financing statements, chattel mortgages and certain liens.
The law provides that no document affecting the right in real estate shall be valid against any person who does not have actual knowledge of the rights of the parties unless that document is recorded. Therefore, an innocent and unknowing purchaser or encumbrancer who acts in ignorance of an unrecorded instrument is reasonably protected. However, for an innocent buyer to become a bona fide purchaser, and prevail over a prior purchaser of the same real property, three conditions must exist:
1. The innocent purchaser must be without knowledge of the prior claim at the time of the purchase;
2. The purchase must be for value; and
3. The document must be the first recorded.
In effect, the purchaser for value must win the race to the recording office and be without notice of the prior claim at the time value was given.
Marketable title to real property is generally determined by an examination of an abstract of title. The examiner will issue a title report as to the interest of grantors and their parties in a parcel of real property.
The buyer's title report, generally called the purchaser's title report, is the chief instrument upon which the buyer relies. It represents an attorney's comments, opinions, and requirements concerning the state of the title to the property, as disclosed in the abstract delivered. It is written solely for the buyer from the buyer's point of view.
The buyer should not rely on a mortgagee's title report since it is written with an entirely different goal in mind. Many defects are of no interest to the mortgagee but may be of great concern to the purchaser who may have to pay later to have them cleared.
The mortgagee will try to obtain a title report relating to the mortgaged property making sure that there are no outstanding liens or encumbrances which may be superior to that of the intended mortgagee. The mortgagee is simply looking for "security" for the investment. It will not be the mortgagee's problem or expense to render the title marketable.
The abstractor is not a guarantor of the title to the real estate. The law imposes upon the abstractor only the duty to exercise due care in searching the title and in the preparation of the abstract. The abstractor can be held liable for any loss caused the purchaser as a result of negligence in omission of a document from the abstract or the incorrect summarization to the content of the instrument. Likewise, an attorney can only be held liable for damages which are caused by negligence in the examination of the abstract. For example, the attorney is liable for any loss caused by failure to discover an existing recorded lien contained in the abstract.
No evidence of title can completely and conclusively reveal the exact state of the title to real property. For instance, an abstract may indicate that the seller has clear title, but the chain of title may contain a forged deed. There is no way of knowing from the abstract whether or not a deed is forged and, of course, such deed passes no title. Also, an abstract will not reveal the rights of parties in possession. The abstract may show title in one person but another may have a superior right through adverse possession. With an abstract and an opinion, together with an examination of the property itself, the buyer can be reasonably certain that a good title can be obtained.
The usual means of curing a defect or a cloud on the title to property are by obtaining quitclaim deeds from all other parties who might have an interest in the property or by bringing an action to quiet title.
Title insurance is a contract which protects the insured against loss occurring through defects in the title to real property. The risk of loss, as in other policies of insurance, is transferred from the property owner to a responsible insurer. A title company will not insure a bad title any more than a life insurance company will insure a person who is terminally ill.
Basically, a title insurance policy provides that the company will indemnify the owner against any loss sustained as a result of a defect in the title to the real estate, provided that the defect is not specifically excluded in the policy. Further, the company usually agrees to defend at its expense any lawsuit attacking the title where such attack is based on a claimed defect covered by the insurance provisions. Examples of typical standard exclusions which the title policy does not insure against are:
1. Rights and claims of parties in possession not shown of record, including unrecorded easements.
2. Any statement of facts an accurate survey would show.
3. Mechanic's liens, or any rights thereto, where no notice of such liens or rights appear of record.
4. Taxes and assessments not yet due or payable and special assessments not yet certified to the treasurer's office.
For additional consideration, all-inclusive owner's title policies may be obtained covering standard exclusions.
The date of the policy is important. The title insurance company guarantees against loss occurring because of defects existing at or before the date of the policy. Defects which come into existence subsequent to the date of insurance of the title policy are not covered.
Should the title insurance company pay a loss within the scope of the policy, the principle of subrogation provides that the company may attempt to collect the loss from a third party in the place of the insured.
Title insurance companies will issue policies to both the owner and the mortgagee. The fee or premium of the title policy, unlike other insurance, is paid only once and the policy continues in force without further payment. The premium, as with other insurance, is based upon the amount of insurance purchased. The owner's title policy is not transferable. Therefore, when the property is resold, the new purchaser should obtain a reissue title policy. The mortgagee need not obtain a reissue policy.
The mortgagee's title policy does not protect the owner's interest in the property. A mortgagee's policy will protect only the mortgagee and only to the extent of the mortgagee's interest, whatever that may be. The equity of the owner is protected only by an owner's policy. In the case of mortgagee's policy, if the insurer pays the mortgagee, the insurance company could enforce the mortgage against the mortgagor .
(The following reprinted by permission from the CalBRE Reference Book, p. 118-119)
The standard policy of title insurance in addition to risks of record protects against:
Off-record hazards as forgery (e. g., a forged deed in the chain of record title), impersonation, and lack of capacity of a party to any transaction involving title to the land (e. g., a deed of an incompetent or an agent whose authority has terminated, or of a corporation whose charter has expired); the possibility that a deed of record was not in fact delivered with intent to convey title; the loss which might arise from the lien of federal estate taxes, which is effective without notice upon death; and, the expense, including attorneys' fees, incurred in defending the title-whether the plaintiff prevails or not.
The standard policy of title insurance does not however protect the policyholder against defects in the title known to the holder to exist at the date of the policy and not previously disclosed to the insurance company; nor against easements and liens which are not shown by the public records; nor against rights or claims of persons in physical possession of the land, yet which are not shown by the public records (since the insurer normally does not inspect the property) ; nor against rights or claims not shown by public records, yet which could be ascertained by physical inspection of the land, or by appropriate inquiry of persons on the land, or by a correct survey; nor against mining claims, reservations in patents, or water rights; nor against zoning ordinances.
These limitations are not as dangerous as they might appear to be. To a considerable degree they can be eliminated by careful inspection by the purchaser or his or her agent (lenders) of the land involved, and routine inquiry as to the status of persons in possession. However, if desired, most of these risks can be covered by special endorsement or use of extended coverage policies at added premium cost.
A. L. T. A. Policy (for lenders)
In California many loans secured by realty have been made by out-of-state insurance companies which were not in a position to make personal inspection of the properties involved except at disproportionate expense. For them and other nonresident lenders, the special A.L. T.A. (American Land Title Association) policy was developed. It expands the risks normally insured against under the standard policy to include the following: Rights of parties in physical possession, including tenants and buyers under unrecorded instruments; reservations in patents; and most importantly unmarketability of title. The new ALTA Loan Policy, approved for use in California on February 8, 1988, includes added cover age; for example, recorded notices of enforcement of excluded matters (like zoning), as well as recorded notices of defects, liens, or encumbrances affecting title that result from a violation of matters excluded from policy coverage, and water rights. Needless to say the insurance company issues such a policy only after itself obtaining a competent survey and a physical inspection of the property.
The American Land Title Association has adopted an owner's extended coverage policy (designated as A. L.T. A. Owner’s Policy [10-21 87]) that provides to buyers or owners the same protection that the A. L. T. A. policy gives lenders. But note that even in these policies no protection is afforded against defects on other matters concerning the title which are known to the insured to exist at the date of the policy yet have not previously been communicated in writing to the insurer, nor against governmental regulations concerning occupancy and use. The former limitation is self-explanatory; the latter limitation exists because zoning regulations concern the condition of the land rather than the condition of title.
Under the provisions of the Insurance Code of California each title insurance company organized under the laws of this State must have at least $500,000 paid-in capital represented by shares of stock, and must deposit with the Insurance Commissioner a "guarantee fund" of $100,000 in cash or approved securities. The purpose of this deposit is to secure protection for title insurer policy holders. A title insurer must also set apart annually, as a title insurance surplus fund, a sum equal to 10 percent of its premiums collected during the year, until this fund equals the lesser of 25 percent of the paid-in capital of the company or $1,000,000.Policies of title insurance are now almost universally used in California largely in the standardized forms prepared by the California Land Title Association, which is the trade organization of the title companies of the state. Every title insurer must adopt and make available to the public a schedule of fees and charges for title policies. The law prohibits a title insurance company from paying, either directly or indirectly, any commission, rebate or other consideration as an inducement for or as compensation on any title insurance business, escrow or other title business in connection with which a title policy is issued.
(End of CalBRE Reference Book excerpt)
LIMITATIONS OF TITLE
An adverse interest affecting title is known as an encumbrance. It is the right or interest in property held by others who are not the legal owners of the property. An encumbrance is any claim, lien, charge, or liability attached to and binding on real property which may affect its value, or burden, obstruct, or impair the use of the property. Although it may lessen the value of the title, it does not necessarily prevent the transfer of ownership.
Public and private actions can have the effect of limiting the ability of the landowner to exercise absolute control over the condition and use of real property. Deed restrictions, easements, licenses, water rights, and encroachments are all examples of such encumbrances or controls.
Restrictions are placed in the deed to control a landowner's use of real property. The grantor may place restrictions upon the right to use the real estate conveyed. Such restrictions must be reasonable and not contrary to public policy. The use of restrictions, usually called deed restrictions or restrictive covenants, is an old practice arising from the rights of property. Owners have the right of free alienation; that is, they may dispose of their estates in any manner they may elect. Deed restrictions, once established, normally run with the land and are a limitation upon the use of all future grantees.
Restrictions are most frequently encountered in the development of subdivisions wherein the limitation is for the benefit of all the landowners. Typical restrictions deal with the minimum size of the house, type of material that may be used, and exclusion of commercial establishments. Well formulated restrictions have a stabilizing effect upon property value. Home owners are protected against forbidden uses. They can rely on the knowledge that a business will not be established next door and that their neighbors house must conform to certain minimum standards. Violations of restrictions can be enjoined through a court action brought by any party for whose benefit the restrictions were imposed.
Court enforcement of just deed restrictions is possible to the extent that it can be proved that a restriction has been violated. Any action may be brought to require the violator to conform to the deed restriction. Enforcement may be sought by the parties to the original deed which contained the restriction and by those persons who are not parties to the agreement if the restriction is imposed for their benefit (e.g., lot buyers within a subdivision).
Deed restrictions may be given an express lifetime by expressing their duration in the deed. Otherwise, such restrictions will terminate by material change in the neighborhood, by unanimous agreement between or among affected parties, and by merger in which one landowner acquires the interest of all persons owning subject to the restriction. Court action will usually be required to properly effect such termination.
An easement is a right of way or right to use another's real property or a portion thereof. An easement holder claims no title to the real property over which the easement exists; rather, an easement carries with it the right to enter and use the property within definable limits.
There are two general types of easements. The easement may be either appurtenant or it may be in gross. An easement appurtenant attaches to and runs with ownership of land. An easement in gross belongs to its owner personally and such right does not pass with transfer of ownership of land.
Easements may be created by a voluntary act or by operation of law. A voluntary act would be by deed or by contract. If an easement is created by contract, the contract must be in writing to be enforced because easements are interests in real property covered by the statue of frauds. An easement may be created by granting such right in a deed, or it may arise through a specific deed reservation of an easement by the grantor of real property.
Easements may also come into existence by implication or by prescription. An easement by implication would be recognized in buyers who purchase land which is totally inaccessible to a public highway except across land retained by the seller. Since the buyers have access rights, right to ingress and egress to and from their land, the buyers obtain an easement by implication over the seller's land (this is also called an easement by necessity). An easement by prescription is one obtained by continuous use of another's property for the statutory period. If such use is open, hostile (contrary to the rights of the landowner), continuous, and uninterrupted for the statutory period, an easement is recognized in favor of the user.
Dominant and servient parcels are common terms used in connection with easements. An easement appurtenant to travel across a neighbor's property is a dominant tenement. Property over which an easement runs in favor of another parcel of real estate is the servient tenement.
An easement may be terminated by a written release given by the easement owner to the affected landowner. The writing could be by quitclaim deed which is a conveyance by the easement owner of all right, title, and interest in the affected parcel. An easement may be terminated by merger in which the owner of either the dominant or servient parcel acquires ownership of the other parcel. Mutual agreement, abandonment, end of the necessity (regarding an easement by necessity), destruction of the servient estate, acquisition of the servient estate by a bona fide purchaser (a person having neither actual or constructive knowledge of the easement), and severance are other means of terminating easements.
A license is not a right or an estate in land, nor is it an encumbrance against land. It is a personal privilege to make reasonable use of the real property of the licensor. Unlike an easement, a license is revocable by the granting party at any time. A license may be oral or in writing, and it may or may not be based upon a contract. Death of either party will terminate a license. Examples of a license would be the privilege to hunt on the property of a neighbor or to park an automobile in a parking lot. Also in this category are tickets to theaters or sporting events.
An encroachment is the wrongful extension of a structure or improvement into the property of another. Buildings, fences, and other structures may encroach on adjacent land. Most encroachments are revealed by an accurate land survey. The party encroached upon may or may not have the ability to have the encroachment removed, depending upon the circumstances.
If an encroachment has been present for the statutory period, the owner of the encroaching structure may assert a right to the affected land on the basis of adverse possession (title by prescription). If the owner of such structure cannot claim adverse possession, the party encroached upon may bring action to have the encroachment removed on the grounds of trespass.
Note: If the encroachment is slight (perhaps measurable in inches), the cost of removal great, and the cause an excusable mistake, courts will not require removal but may award dollar damages.
Other types of encumbrances are those which have an effect on the transferability of real property. These are generally monetary in nature.
A lien is a right given to a creditor to have a debt or charge satisfied out of the real or personal property belonging to a debtor. It always arises from a debt and can be created by agreement of the parties (mortgage) or by operation of law (tax lien). A lien may be a general lien, affecting all of the debtor's property, as in the case of a judgment lien. It can also be a special lien, affecting only a specific property, as when a mortgage is given on one piece of property.
Liens can be statutory or equitable, voluntary or involuntary. For example, a mechanic's lien is an involuntary, statutory, special lien, whereas a mortgage is a voluntary, equitable, special lien.
At the initiation of a law suit, the plaintiff who wishes to make known the claim against the property may do so by filing a statutory notice of lis pendens or pendency of action. This should be filed in the county in which the property is located, giving constructive notice of a claim against the real property of the debtor.
Liens do not transfer title to the property. Until foreclosure, the debtor retains title. Certain statutory liens (mechanic's liens and judgments) become unenforceable after a lapse of time from origination or recording unless a foreclosure suit is filed. The senior or prior lien is normally determined by the date of recordation. State property tax liens and assessments, however, take priority over all liens, even those previously recorded.
The mortgage is the most typical encumbrance against real property. It is a voluntary special lien, in that the property owner voluntarily mortgages a specific property. A mortgage is a means, recognized by law, by which property is pledged as security for the payment of debt.
Most states are "lien theory states" where the mortgagee (lender) acquires a lien over the real property of the mortgagor (borrower) in order to secure a debt. In other states, called "title theory states," the mortgagee acquires some form of title to a mortgaged property in order to secure a debt. The primary difference between lien theory and title theory states is the right of mortgagees with respect to default. In the most strict sense in a lien theory state, the mortgagor is entitled to possess until foreclosure, provided the mortgage has no provisions to the contrary. In the most strict sense in a title theory state, the mortgage conveys title to the mortgagee with reconveyance to the mortgagor when the mortgage debt is satisfied.
Actually, the rights of the parties in title theory states are treated substantially the same as those in lien theory states. In the event of default by the mortgagor, the mortgagee may foreclose on the mortgage and ultimately, if the mortgagor does not redeem (pay the debt plus any accrued interest) during a stated period, the mortgagee may have the mortgaged property sold at a public sale to satisfy the debt. If proceeds from a foreclosure sale are insufficient to pay the amount of the debt, a deficiency judgment will be entered against the defaulting mortgagor for the difference. During the term of the mortgage, the mortgagor is the exclusive title holder of the real property, but such real property is subject to the outstanding lien in favor of the mortgagee.
Unpaid state, county, municipal, or quasi-public (e.g., school board) real estate taxes may result in a special lien against the taxed real property. The taxing entity may ultimately conduct a tax sale of the affected real property to satisfy the debt.
Certain real property is exempted in whole or in part from real estate taxation. The most typical examples of tax exempt property are public libraries, free museums, public cemeteries, non-profit schools, non-profit colleges and property used exclusively for religious or charitable purposes.
Real property taxes (ad valorem taxes) are apportioned according to the value of nonexempt property. The determination of the property value is the duty of the county assessor, or duly elected county officer. There are generally two methods of determining the assessed valuation of real estate. The first method values property at fair market value and deducts exemptions to determine the taxable valuation (assessment). This is a market value assessment. The second method values property at fair market value then applies a fractional percentage against the value to determine the assessment in which exemptions are deducted to determine the net assessed valuation. Such assessment is then used to determine the tax liability imposed against each parcel of real property in the county. California is a fractional assessment state.
Tax liens are usually enforced through forced public sales of the affected real property. Generally, the owner of the property is given a period of redemption during which time he may buy back the real property for the sale price plus a penalty assessed as a percentage of the price brought from the public sale. Tax (and special assessment) liens are prior, superior, and paramount to all other liens, claims, or encumbrances of whatever character, including those of a mortgagee, judgment creditor, or other lienholder whose rights were performed prior to the date that the tax lien was filed in the District Court judgment docket, located in the office of the county clerk.
Special assessments are taxes or levies customarily imposed against only those specific parcels of realty that will benefit from a proposed public improvement. Whereas property taxes are levied for the support of the general functions of government, special assessments cover the cost of specific local improvements such as streets, sewers, irrigation, and drainage.
The owner usually has the option of paying special assessments in installments over several years with interest or paying the balance in full at the beginning.
When property is sold, the sales contract should specify which party is responsible for payment of the assessments, if any, at the time of closing. Because of the increased property value generally resulting from the improvement, the seller usually pays for all improvements substantially completed by the closing date. Improvements not substantially completed but authorized or in progress are usually assumed by the buyer.
Special assessments are generally apportioned according to benefits received, rather than by the value of the land and buildings being assessed. For example, in a residential subdivision, the assessment for installation of storm drains, curbs and gutters is made on a front-foot basis. The property owners are charged for each foot of that lot that abuts the street being improved. In the case of a street being paved for the first time, all nearby properties may share in the assessment in some proportion based on proximity to the improvement.
Owners of condominiums may be subject to special assessments if major improvements are made to the building such as installation of automatic elevators or corridor carpeting.
A mechanic's lien is a statutory lien (created by the legislature) in favor of those who furnish labor or materials for the improvement of real property, not repairs. These liens tend to improve the chances of such persons receiving compensation for the labor and materials provided.
The lien obtained by a person furnishing materials for such an improvement is called a materialman's lien, but the law relating to both liens is the same, and both liens will be treated the same in this discussion. Such statutory liens may be obtained by all persons, including day laborers, who provide labor or materials for the improvement of real property.
A mechanic's lien is superior to all liens which were filed subsequent to the commencement of such labor or provision of materials by the lien holder. This lien is also superior over any lien of which the lien holder had no notice, and which was unrecorded at the time of the commencement of the work or the providing of materials by the lien holder. If the underlying debt is paid to the lien holder, the lien is terminated or if the lien is proven invalid in a court of law, the lien is terminated. If a valid lien exists, such lien may be discharged by the person against whose interest such lien was filed by depositing with the county clerk the amount of such claim in cash and executing a bond to the claim. In the case of a lien in question, the same process may be used until the court can make a determination.
Failure to pursue a mechanic's lien within one year will terminate the lien. If enforcement is pursued and payment on the debt is not forthcoming, the lien holder may have the affected real property sold to satisfy the debt. If the affected property is a homestead, certain conditions must have been met before the lien may attach to force sale of the property (i.e., the improvements must have been agreed to by both husband and wife).
(The following reprinted by permission from the CalBRE Reference Book, p.96-101)
To convert the security for the lien into money requires:
1.Timely recordation of a notice and claim of lien (one document) in the county recorder's office in which the work of improvement is located;
2. Perfection of the recorded notice and claim of lien by the filing of an action (a lawsuit) in the right court;
3.Recordation of a lis pendens;
4.Timely pursuit of the lawsuit to judgment; and
5. Enforcement of that judgment by a mechanic's lien foreclosure sale.
Persons specifically entitled to mechanics' liens by virtue of the constitution and the statutes include the following:
Registered Lessors of Equipment
Licensed Land Draymen
Contractors Union Trust Fund
Machinists (Section 3111 Civil
Preliminary 20-Day Notice (Private Work)
The initial step in the perfection of a claim of mechanic's lien for all claimants, except one under direct contract with the owner, one performing actual labor for wages or an express trust fund as defined in Civil Code Section 3111, is to give the preliminary 20-day notice specified in Section 3097 of the Civil Code.
Each person serving a preliminary 20-day notice may file (not record) that notice with the county recorder in which any portion of the real property is located. The filed preliminary 20-day notice is not a recordable document and, hence, is not entered into the county recorder's indices which impart constructive notice. Filing of the preliminary 20-day notice does not impart actual or constructive notice to any person of the existence (or contents) of the filed preliminary 20-day notice. No duty of inquiry on the part of any party to determine the existence or contents of the preliminary 20-day notice is imposed by the filing. The purpose of filing the preliminary 20-day notice is limited. It is intended to help those who filed the preliminary 20-day notice get notice (from the county recorder by mail) of recorded notices of completion and notices of cessation. Once the county recorder records either a notice of completion or cessation, he/she is required within 5 days after the recording of a notice of completion or notice of cessation to mail to those persons who filed a preliminary 20-day notice, notification that notice of completion or cessation has been recorded
Failure of the county recorder to mail the notification to the person who filed the preliminary 20-day notice or failure of those persons to receive notification shall not affect the period within which a claim of lien is required to be recorded. The index maintained by the recorder of filed preliminary 20-day notices must be separate from those indices maintained by the county recorder of those official records of the county which by law impart constructive notice.
Termination of the Lien
Voluntary release of the lien, normally after payment of the underlying debt, will terminate the lien. If a mechanic's lien claimant fails to commence an action to foreclose the claim of lien within 90 days after recording the claim of lien and if within that time no extended credit is recorded, the lien is automatically null, void and of no further force and effect.
If the lien is foreclosed by court action, there may ultimately be a judicial sale of the property and payment to the lienholder out of the proceeds.
Notice of No responsibility
The owner, or any person having or claiming any interest in the land, may, within 10 days after obtaining knowledge of construction, alteration, or repair give notice that he or she will not be responsible for the work by posting a notice in some conspicuous place on the property and recording a verified copy thereof. The notice must contain a description of the property with the name and nature of title or interest of the person giving it, name of the purchaser under the contract, if any, or lessee if known and a statement that the person giving the notice will not be responsible for any claims arising from the work of improvement. If such notice is posted, the owner of the interest in the land may not have owner's interest liened, provided the notice is recorded within the ten-day period.
The validity of a notice of nonresponsibility cannot be determined from the official county records since they will not disclose whether compliance has been made with the code requirements as to posting on the premises. If such posting has not been made, a recorded notice affords no protection from a mechanic's lien.
Release of lien bond
Owners and contractors disputing the correctness or the validity of a recorded claim of mechanic's lien may record, either before or after the commencement of an action to enforce the claim of lien, a release lien bond in accordance with the provisions of Civil Code Section 3143.A proper release of lien bond, properly recorded, is effective to "lift" or release the claim of lien from the real property described in the release of lien bond as well as any pending action brought to foreclose the claim of lien.
(End of CalBRE Reference Book excerpt).
Other liens affecting only one parcel of land include vendee's lien, available to the buyer (vendee of real property in the event of the seller's breach, vendor's lien, available to the seller (vendor) where buyer does not pay the lien, available to the seller (vendor) where buyer does not pay seller the purchase price, and attachment surety bond liens.
Unpaid specific taxes
Nonpayment of tax liabilities based upon such taxes as state and federal income and/or estate taxes, corporate franchise taxes, etc., generally causes a lien to be placed on all property owned by the nonpaying party. If the specific tax is a state tax and the estate has not paid such a tax, a lien is placed over all of the real and personal property included in the estate. Clear title to a property cannot be given until tax liens are discharged.
The debts of a decedent must be paid out of the estate. It is not uncommon for the decedent to have included a provision in a will which sets aside money or assets to pay outstanding debts. If no such provision is present, or if a decedent dies intestate, the property of the estate must be used to satisfy the debts. A lien against all estate property, except for homestead property, exists on the basis of all just debts acquired by the decedent while living. Personal property will be resorted to first to satisfy such debts, but in the event that the personal property is insufficient to pay the debts, resort may be had to real property contained in the estate of the debtor.
A judgment is a judicial determination in a legal action as to the rights and liabilities of the parties. The most common legal judgment is one for money damages. Once a money judgment is obtained, the judgment creditor (the person who has obtained the judgment) acquires a lien over all property of the judgment debtor, except homestead property, if the property is located in the same county as the court where such judgment was rendered. By properly filing (docketing) such judgment lien in other counties in which the judgment debtor owns property, the judgment creditor may obtain a lien over most property owned by the debtor.
If the debtor fails to pay on the judgment, the creditor may bring an action to have the debtor's property sold to satisfy the judgment debt. The debtor's personal property will be sold first, but if the sale of the personal property is insufficient to cover the judgment, the real property over which the creditor has obtained a judgment lien will be sold to satisfy the debt.
In California, as other states, ownership of one's home is given certain protection by law. The concept or law of homestead is founded on public policy considerations to prevent the loss of home and disruption of family life. Many states have enacted homestead statutes to protect the family from the claims of creditors. The homestead is the owner's primary residence together with the land and surrounding buildings. Homestead is established to do the following:
Protect one spouse from the other spouse selling the home without their consent.
Protect the owner, whether married or single, from forced sale to satisfy the claims of general creditors.
Insure an owner's widow, widower or minor children will have a home safe from the claim's of certain creditors.
Note: The homestead designation will not prevent claims for taxes and special assessments, mortgage liens, or mechanic's liens.
(The following is reprinted by permission from the CalBRE Reference Book, p.110-113)
A homestead declaration does not restrict or limit any right to convey or encumber the declared homestead.
To be effective, the declaration must be recorded; when properly recorded, the declaration is prima facie evidence of the facts contained therein; but off-record matters could prove otherwise.
Rights of Spouses. A married person who is not the owner of an interest in the dwelling may execute, acknowledge, and record a homestead declaration naming the other spouse who is an owner of an interest in the dwelling as the declared homestead owner but at least one of the spouses must reside in the dwelling as his or her principal dwelling at the time of recording.
Either spouse can declare a homestead on the community or quasi-community property, or on property held as tenants in common or joint tenants, but cannot declare a homestead on the separate property of the other spouse in which the declarant has no ownership interest. A homestead cannot be declared after the homeowner files a petition in bankruptcy.
The homestead declaration does not protect the homestead from all forced sales; e.g., it is subject to forced sale if a judgment is obtained:
(1)prior to the recording of the homestead declaration
(2)on debts secured by encumbrances on the premises executed by the owner before the declaration was filed for record and
(3) obligations secured by mechanics', contractors', subcontractors', laborers', materialmen's or vendors' liens on the premises. Voluntary encumbrances by the owner of the homestead are not affected by a declaration of homestead. A mortgage or deed of trust is an example of a voluntary encumbrance.
End of CalBRE Reference Book excerpt)