CHCP CHCP Lien & Encumbrance Resolution 3 — Questions and Answers
Question 1: An easement appurtenant differs from an easement in gross in that an easement appurtenant:
- Expires after 10 years
- Benefits a specific adjacent parcel of land and transfers with it (Correct answer)
- Can only be granted by a government entity
- Applies only to utility companies
Correct answer: Benefits a specific adjacent parcel of land and transfers with it
An easement appurtenant is tied to the ownership of a benefiting parcel (dominant estate) and automatically transfers when that land is sold, unlike an easement in gross which belongs to a person or entity.
Question 2: A deed restriction that limits a property to residential use only is an example of which type of encumbrance?
- Lien
- Easement
- Covenant or deed restriction (Correct answer)
- Encroachment
Correct answer: Covenant or deed restriction
Covenants, conditions, and restrictions (CC&Rs) are private deed-based limitations on land use that run with the land and bind future owners.
Question 3: Before closing, a title examiner discovers that a neighbor's fence encroaches two feet onto the seller's property. This is categorized as which type of encumbrance?
- Lien
- License
- Encroachment (Correct answer)
- Lis pendens
Correct answer: Encroachment
An encroachment occurs when a structure from one property illegally extends onto an adjoining property, potentially clouding title or creating a boundary dispute.
Question 4: A title company issues an 'insure over' decision when it agrees to:
- Waive the need for a title search
- Provide coverage for a specific title defect or lien that cannot be immediately resolved (Correct answer)
- Reduce the premium for the lender's policy
- Close a transaction without a Closing Disclosure
Correct answer: Provide coverage for a specific title defect or lien that cannot be immediately resolved
Insuring over means the title insurer agrees to accept the risk of a known defect or lien and provide coverage for potential losses arising from it, rather than requiring full resolution before closing.
Question 5: Which process allows a title company to step into the shoes of an insured who has paid a loss in order to pursue recovery from the responsible party?
- Subrogation (Correct answer)
- Subordination
- Indemnification
- Reconveyance
Correct answer: Subrogation
Subrogation gives the title insurer the legal right to recover funds from a third party responsible for the loss after the insurer has compensated the insured.
Question 6: A closing agent should obtain a 'payoff statement' from a lienholder because it provides:
- The original loan amount only
- The exact amount required to fully satisfy the lien as of a specific date, including per diem interest (Correct answer)
- The lienholder's wire transfer routing number only
- A waiver of the lien without payment
Correct answer: The exact amount required to fully satisfy the lien as of a specific date, including per diem interest
A payoff statement specifies the total amount needed to fully discharge the debt on a given date, including outstanding principal, accrued interest, and any fees.
CHCP CHCP Lien & Encumbrance Resolution 3
An easement appurtenant differs from an easement in gross in that an easement appurtenant: