What is an encumbrance on immovable property?

The concept and essence of restrictions on immovable property

Quite often, people look for an answer to this question: "An encumbrance on movable property — what is it?" Restrictions on immovable property are an important legal institution. It governs the use, possession and disposal of real estate. Such restrictions can be imposed for various reasons:

• protecting public interests;
• complying with environmental norms;
• safeguarding the rights of others;
• other reasons.

Such restrictions can be imposed by legislation, a court ruling, an agreement between the parties or administrative bodies. They are highly significant for protecting the rights of property owners, upholding public interests and preventing conflicts between neighbors and other interested parties.

Legal aspects

Restrictions on immovable property involve a number of legal norms. These are what govern the procedure, grounds and consequences of the decision imposed. The legal aspects cover:

• the grounds for adopting such a decision;
• the types of restrictions;
• the procedure for imposing an encumbrance;
• the legal consequences;
• protection of rights.

These aspects provide legal certainty and protection for the rights of owners of immovable property and other interested parties, and they contribute to the stability and predictability of legal relations in the property sphere. 

The impact on the property market

Restrictions on immovable property can have a significant impact on the property market, in particular on:

• Value: the presence of certain restrictions (a mortgage, easements, seizure) can lower the market value of a property. This is because potential buyers aren't prepared to pay a high price for property burdened with restrictions.
• Liquidity: restrictions can complicate the process of selling or transferring rights to another type of property. Such property is less liquid, since potential buyers may be wary of additional risks.
• Risks: certain restrictions may be perceived by investors as an additional risk. In this way, the investment appeal can decline.
• Access to financing: financial institutions and banks are less inclined to grant loans secured by property that is under an encumbrance.
• Market dynamics: restrictions can lead to changes in supply and demand on the property market. And a significant drop in value makes such housing appealing to buyers looking for more affordable options.
• Development and growth: regulatory restrictions on development can affect plans for growth and construction. This can limit developers' ability to deliver new projects.
• Stability and predictability: although restrictions can have negative consequences, they can also provide stability and predictability on the property market.
• Protecting the rights and interests of various parties: restrictions can protect the rights of property owners, tenants, neighbors and other interested parties.

Restrictions on immovable property affect the property market in a comprehensive way. They can both limit and protect the interests of various market participants. This contributes to its stability and predictability.

The main types of property encumbrance

Restrictions on immovable property can be of various kinds. Among the main types, the following can be identified:

• Easement. It comes in two forms: private and public. The first case consists of the right to limited use of someone else's land plot to meet the needs of the owner of the encumbered property (the right of passage on foot or by vehicle). The second is the right to use a land plot granted in the interests of a limited group of people (laying utilities).
• Mortgage. This type of restriction on immovable property serves as security for the debtor's fulfillment of obligations to the creditor. If the requirements aren't met, the property may be handed over to repay the debt.
• Lease. The transfer of immovable property for temporary use to another person, and the terms under which ownership is retained by the lessor.
• Prohibition on alienation. The imposition of a veto on the sale, gifting or other forms of alienation of immovable property without the consent of a particular person or body.
• Seizure of property. The imposition of a ban on disposing of or using immovable property as part of enforcing court rulings, or as a measure to secure a claim.
• Development restrictions. This type refers to the norms and rules governing the height, area and purpose of buildings, the placement of structures and so on.
• Land easements. The right to limited use of someone else's land plot — for laying utilities, pipelines and so on, for example.

Such restrictions are aimed at protecting the rights of property owners. They also ensure that public interests are upheld and prevent conflicts between interested parties, such as neighbors.

Procedures for checking encumbrances on immovable property

Before buying a property, you should check it for any encumbrances. For example, if you've decided to buy a home in the Nordica Residence residential complex new build, you should first carry out an appropriate check. This can be done in two ways:

• Using state registers.
• By turning to notaries and lawyers.

Each option has its own particular features and differences. Let's look at each one in more detail — this will help you understand how the procedure works in each case.

Using state registers

The State Register of Encumbrances on Movable Property is a computer database that stores data on the emergence, change and termination of restrictions. Applications for foreclosure on the subject of the encumbrance are also entered into this register. 

There are two types of state register:

• The State Register of Property Rights to Immovable Property.
• The State Land Cadastre.

The procedure for checking through the register of encumbrances on immovable property looks like this:

1. Submitting a request. This can be done in person — through a representative or in electronic form.
2. Receiving an extract. After the request is processed, the applicant receives an extract containing information about the registered rights and encumbrances on a specific property.

In this way, you can obtain information about:

• ownership rights;
• encumbrances;
• leases;
• land easements.

Using state registers has a number of advantages. You get transparent information and can be confident in the transparency of transactions, the protection of owners' rights and public oversight. 

Turning to notaries and lawyers

You can also seek help from the relevant specialists: lawyers and notaries. Each specialist carries out certain procedures and can provide reliable information about the status of a specific property. 

A notary helps you obtain certain types of services:

• consultations;
• checking documents;
• obtaining extracts and registers;
• certifying documents.

Lawyers provide clients with the following services:

• legal consultations;
• legal analysis;
• transaction support;
• representation in court.

By choosing one of the specialists mentioned above, you get services built on professionalism and experience. The client can be confident in their legal safety, promptness and expertise, as well as in the protection of their interests. 

Methods of removing encumbrances from immovable property

Sometimes people decide to buy immovable property that is under an encumbrance. This is because you can save a significant amount and then carry out the appropriate procedures to remove such restrictions. In that case, you should know how to remove an encumbrance from immovable property. There are various methods for handling such a restriction.

There's the option of simply paying off the debt in the case of a mortgage or a tax seizure. There can also be the expiry of the encumbrance's term — this option suits leases and easements. If the encumbrance was activated by a court ruling or by the relevant authority, then it can be canceled by that same body.

Legal procedures

The procedure for removing a restriction on immovable property requires following certain legal procedures, depending on the specific circumstances and the type of encumbrance. In the case of a mortgage, the process is as follows:

1. Paying off the loan.
2. Obtaining a certificate from the bank.
3. Submitting an application to the state register.

If it was a tax seizure, then in that case you should pay off the debt, obtain a supporting document and submit it to the relevant body. So for each type of restriction there's a particular procedure of legal actions that will help remove it.

The role of court rulings

If an encumbrance on the property was previously imposed by a court ruling, then in that case you need to submit the appropriate application and obtain a cancellation. After this, a ruling is received in written form and the appropriate application is submitted to the state register.

Removing an encumbrance from immovable property that was imposed by an authority happens in an identical way. In that case, the decision is made not by a court but by the body that issued the previous decision.

Practical tips

The procedure for removing a restriction on immovable property requires preparation, knowledge of this area and attention to every detail. Among the simple yet effective tips, the following can be identified:

• assess the type of restriction, since the plan for your next steps will depend on it;
• get legal advice;
• fulfill all financial obligations and obtain confirming documents;
• prepare the application to the register correctly and submit it;
• follow the process and keep track of its progress;
• obtain documentary confirmation that the encumbrance has been removed and keep all the documents.

This process requires a thorough approach. Be sure to study the procedure for the state registration of property rights to immovable property and their encumbrances. Enlist the help of specialists, since a person who isn't versed in this can miss various pitfalls and take mistaken steps. 

Risks and safety when buying property with encumbrances

Buying property with an encumbrance can involve certain risks and calls for attentiveness and caution. Among the main risks:

• the legal cleanliness of the property;
• financial obligations;
• the rights of third parties;
• tax seizures or debt.

Safety factors when buying this type of property:

• a legal check;
• documentation;
• financial preparation;
• a general check.

As you can see, there are negative and positive sides. The main thing is to weigh up all the pros and cons.

How you can minimize the risks

When buying property with an encumbrance, a proper legal check and a thorough analysis of all the documentation are of decisive importance. This will help reduce the risks and ensure the safety of your investment in the future. 

Contract terms and document checks

When checking a property with a restriction, pay attention to the contract terms and all the documentation. Note the description of the property, the terms of sale and of removing the restrictions, the guarantees and liability, and so on. The documents need special attention and should be checked carefully: the legal part, permits, certificates and so on.