Lien and Encumbrances: Meaning and Impact.
When you review the draft Contract to Sell that your seller is proposing for approval, you might noticed the words “free from any lien and encumbrances.” These words might be unfamiliar to you.
So what is the the meaning and implication of these words in you proposed Contract to Sell?
First, we need to define “lien” and “encumbrances.”
In this regard, pay attention to a Supreme Court decision defining these terms.
In the case of People vs The Regional Trial Court of Manila (GR 81541 Oct. 4, 1989), ponencia of Associate Justice Abraham Sarmiento, the high court elucidates, viz:
“On the other hand, a ‘lien’ is a charge on property usually for the payment of some debt or obligation. A ‘lien’ is a qualified right or a proprietary interest, which may be exercised over the property of another. It is a right, which the law gives to have a debt satisfied out of a particular thing. It signifies a legal claim or charge on property, either real or personal, as a collateral or security for the payment of some debt or obligation.”
Similarly, an “encumbrance is a burden upon land, depreciative of its value, such as a lien, easement, or servitude, which, though adverse to [the] interest of [the] landowner, does not conflict with his conveyance of [the] land in fee.
“The following are considered encumbrances: a claim, lien, charge, or liability attached to and binding real property; e.g., a mortgage, judgment lien, lease, security interest, easement or right of way, accrued and unpaid taxes. A lien is already an existing burden or charge on the property while a notice of lis pendens, as the very term connotes, is only a notice or warning that a claim or possible charge on the property is pending determination by the court.”
In line with the above-cited jurisprudential definitions of the words lien and encumbrance, it follows then that when the contract to sell in your query stated that the subject property is “free from any lien and encumbrances,” it means that the same property is free from any charge, debt or obligation.
Moreover, such statement amounts to an undertaking on the part of the seller that the property subject of sale is not imputed with any qualified right, proprietary interest or by an exercisable burden upon the land by another.
In sum, the phrase “free from any lien and encumbrances” is your seller’s way of telling you that the property subject of sale is clear from any problem or any kind of obligation.