CA legal aspects of Real Estate: Chapter 10
UPDATED ACTUAL Exam Questions and
CORRECT Answers
encumbrance - CORRECT ANSWER - is the term used to describe an interest in and right
to real property that limits the legal owner's freehold interest. In effect, an encumbrance is
another's right to use or take possession of a legal owner's property, or to prevent the legal owner
from enjoying the full bundle of rights in the estate.Easements and liens are the most common
types of encumbrances. They can affect the property's use and its legal ownership, value, and
transfer.
easement - CORRECT ANSWER - is a nonfinancial encumbrance that restricts the use of
the property itself. For example, an easement, such as a utility easement, enables others to use
the property, regardless of the owner's desires. Other examples of nonfinancial encumbrances
include profits, encroachments, deed restrictions, licenses, and nuisances
lien - CORRECT ANSWER - •a financial encumbrance and monetary charge that
represents a security interest in the property. The property is the security for the payment of a
debt or judgment. For example, a lien, such as a tax lien, can be placed on the property's title,
thereby restricting the owner's ability to transfer clear title to another party.
Define an encumbrance. - CORRECT ANSWER - An encumbrance is the term used to
describe another's interest in and right to real property that limits the legal owner's freehold
interest.
List three types of nonfinancial encumbrances. (Additional answers on page 2.) - CORRECT
ANSWER - •Easements
•Encroachments
Deed Restrictions
What is the purpose of deed restrictions? - CORRECT ANSWER - The purpose of deed
restrictions is to create a standard within a community and protect home values
, What is a lien? - CORRECT ANSWER - •A lien is a creditor's claim against personal or
real property as security for a debt of the property owner.
•Liens have the following legal features: - CORRECT ANSWER - •A lien does not
convey ownership, with one exception.A lienor generally has an equitable interest in the
property, but not legal ownership. The exception is a mortgage lien on a property in a title-theory
state. In these states, the mortgage transaction conveys legal title to the lender, who holds it until
the mortgage obligations are satisfied. During the mortgage loan period, the borrower has
equitable title to the property.
•A lien attaches to the property. If the property is transferred, the new owner acquires the
liensecuring the payment of the debt. In addition, the creditor may take foreclosure action against
the new owner for satisfaction of the debt.
•A property may be subject to multiple liens.There may be numerous liens against a particular
property. The more liens there are recorded against property, the less secure the collateral is for a
creditor, since the total value of all liens may approach or exceed the total value of the property.
•A lien terminates on payment of the debt and recording of documents.Payment of the debt and
recording of the appropriate satisfaction documents ordinarily terminate a lien. If a default
occurs, a suit for judgment or foreclosure enforces the lien. These actions force the sale of the
property.
•What are four legal features of a lien? - CORRECT ANSWER - •A lien does not convey
ownership, with the exception of mortgage liens or deeds of trust.
•A lien attaches to the property.
•A property may be subject to multiple liens.
A lien terminates on payment of the debt and recording of documents.
•List the two main differences between a deed of trust and mortgage. - CORRECT
ANSWER - •Mortgages have two parties and deeds of trust have three parties.
Foreclosures with a mortgage are a judicial process and with a deed of trust they are non-judicial.
What is an involuntary lien? - CORRECT ANSWER - An involuntary lien is one that a
legal process places against a property which the property owner did not agree or consent to.
UPDATED ACTUAL Exam Questions and
CORRECT Answers
encumbrance - CORRECT ANSWER - is the term used to describe an interest in and right
to real property that limits the legal owner's freehold interest. In effect, an encumbrance is
another's right to use or take possession of a legal owner's property, or to prevent the legal owner
from enjoying the full bundle of rights in the estate.Easements and liens are the most common
types of encumbrances. They can affect the property's use and its legal ownership, value, and
transfer.
easement - CORRECT ANSWER - is a nonfinancial encumbrance that restricts the use of
the property itself. For example, an easement, such as a utility easement, enables others to use
the property, regardless of the owner's desires. Other examples of nonfinancial encumbrances
include profits, encroachments, deed restrictions, licenses, and nuisances
lien - CORRECT ANSWER - •a financial encumbrance and monetary charge that
represents a security interest in the property. The property is the security for the payment of a
debt or judgment. For example, a lien, such as a tax lien, can be placed on the property's title,
thereby restricting the owner's ability to transfer clear title to another party.
Define an encumbrance. - CORRECT ANSWER - An encumbrance is the term used to
describe another's interest in and right to real property that limits the legal owner's freehold
interest.
List three types of nonfinancial encumbrances. (Additional answers on page 2.) - CORRECT
ANSWER - •Easements
•Encroachments
Deed Restrictions
What is the purpose of deed restrictions? - CORRECT ANSWER - The purpose of deed
restrictions is to create a standard within a community and protect home values
, What is a lien? - CORRECT ANSWER - •A lien is a creditor's claim against personal or
real property as security for a debt of the property owner.
•Liens have the following legal features: - CORRECT ANSWER - •A lien does not
convey ownership, with one exception.A lienor generally has an equitable interest in the
property, but not legal ownership. The exception is a mortgage lien on a property in a title-theory
state. In these states, the mortgage transaction conveys legal title to the lender, who holds it until
the mortgage obligations are satisfied. During the mortgage loan period, the borrower has
equitable title to the property.
•A lien attaches to the property. If the property is transferred, the new owner acquires the
liensecuring the payment of the debt. In addition, the creditor may take foreclosure action against
the new owner for satisfaction of the debt.
•A property may be subject to multiple liens.There may be numerous liens against a particular
property. The more liens there are recorded against property, the less secure the collateral is for a
creditor, since the total value of all liens may approach or exceed the total value of the property.
•A lien terminates on payment of the debt and recording of documents.Payment of the debt and
recording of the appropriate satisfaction documents ordinarily terminate a lien. If a default
occurs, a suit for judgment or foreclosure enforces the lien. These actions force the sale of the
property.
•What are four legal features of a lien? - CORRECT ANSWER - •A lien does not convey
ownership, with the exception of mortgage liens or deeds of trust.
•A lien attaches to the property.
•A property may be subject to multiple liens.
A lien terminates on payment of the debt and recording of documents.
•List the two main differences between a deed of trust and mortgage. - CORRECT
ANSWER - •Mortgages have two parties and deeds of trust have three parties.
Foreclosures with a mortgage are a judicial process and with a deed of trust they are non-judicial.
What is an involuntary lien? - CORRECT ANSWER - An involuntary lien is one that a
legal process places against a property which the property owner did not agree or consent to.
