Buying an apartment with an encumbrance

Last update: 02/05/2020

An encumbrance is any restriction on the ownership of an apartment. In this case, they say that the apartment is encumbered with the rights of third parties . What does this mean in terms of a purchase and sale transaction, and how does this threaten the Seller and the Buyer?

A transaction for the purchase and sale of an apartment with an encumbrance means that it (the transaction) contains the interests and legal rights of those entities that are not its title (i.e., officially registered) owners.

These third party rights in a transaction create problems for both the Seller and the Buyer. This may threaten the seller of the apartment with additional difficulties during the sale, and may bring an unpleasant surprise to the Buyer in the form of restrictions on his property rights.

The encumbrance is , as it were, tied to the apartment itself by some kind of weight, and when its owner changes, it remains “hanging” on it until it is disposed of.

Let us explain in more detail what is what and how to deal with it.

Procedure for an alternative apartment purchase and sale transaction. How to organize it - see the link.

What is encumbrance of rights to an apartment?

The legislative restriction (encumbrance) of ownership of real estate was given in Article 1, Federal Law-122 of July 21, 1997 “On state registration of rights to real estate and transactions with it,” which happily sunk into oblivion (i.e., lost force). But we will remind you what the essence is - in our own words.

An encumbrance placed on an apartment means that persons (both individuals and legal entities) who are not the owners of the property, nevertheless, have certain rights in relation to this object. For example, the right of use or the right of pledge. In addition, administrative sanctions imposed on the property of a specific owner (bans, arrests) can also encumber an apartment

Because of this, the owner of the apartment cannot fully exercise his rights to own, use and dispose of his property until the encumbrance is lifted .

Before the purchase and sale transaction, each Buyer needs to find out whether an encumbrance has been placed on the apartment, and whether there are any restrictions on the ownership rights to it. How to do it? More on this below.

Online order Extracts from the Unified State Register and other SERVICES for purchasing an apartment - HERE.

Who should pay the realtor - the Buyer of the apartment or the Seller? Market practice – see the link.

Risks for buyers

Buying an apartment with an encumbrance is a normal, although not so common, practice. The cost of such real estate is usually below market value. However, there are certain risks and before deciding to buy an apartment under encumbrance, you must carefully weigh everything.

Temporarily absent residents (military service, treatment) can declare their legal right to real estate;
Liability may arise to financial institutions if the seller, under the contract, does not undertake to repay the debt through the sale of the apartment;
Unforeseen expenses may arise. For example, to pay utility debts, penalties for tenants;
Termination of the contract and return of the apartment to the previous owner.

In this matter, it is very important to study what encumbrances there are on an apartment, check them carefully and make a decision for yourself. You can eliminate the possibility of fraud by contacting real estate sales specialists who will study your situation, check all documents and help you make the right choice.

Most often, apartments with encumbrances are bought if the seller cannot pay the mortgage loan and sells it along with the debt. The situation is exactly the same with installments - the apartment is pledged to the seller until the full amount is paid. You may consider purchasing an apartment with tenants living in it. This is especially true for Sochi, where many people buy apartments for rent. In this case, you won’t even have to look for tenants.

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What are the encumbrances of rights to an apartment?

The rights of the owner can be limited in various ways and for various reasons. Most encumbrances on real estate require mandatory registration in Rosreestr, but there are also those that are not registered in the register of rights.

Registered encumbrances of ownership of residential space can arise both as a result of the conclusion of contracts (i.e., at the will of the owner), and as a result of the issuance of an act of a body authorized by law, as well as as a result of a court decision (i.e., regardless of the will of the owner) .

Encumbrances of rights registered in Rosreestr

In the case of apartments, registered encumbrances arise as a result of:

Pledge of an apartment against a loan (the apartment is pledged to the bank under a mortgage agreement);
Sale of an apartment in installments (the apartment remains pledged to the Seller until the full amount is paid to him);
Conclusion of a long-term (more than a year) apartment rental or free use (with registration of this agreement in Rosreestr);
Conclusion of a trust management (for example, by a guardian in the interests of the ward, in accordance with Article 38 of the Civil Code of the Russian Federation);
Conclusion of a Lifetime Maintenance Agreement with dependents (in this case, the apartment is burdened with rent, or more precisely, with the obligation to pay rent);
A ban on performing registration actions with an apartment (for example, during an investigation);
Seizure of an apartment (by a court decision, as a result, for example, of collection of debts of the apartment owner).

Records of these restrictions on rights are entered into the Unified State Register of Real Estate (USRN). Therefore, any attempt to register a transaction for the purchase and sale of an apartment will encounter a requirement from Rosreestr for consent to the transaction of third parties, or permission from the relevant authorities, or registration will be refused.

Registered restrictions (encumbrances) on the ownership of an apartment may appear for the following reasons:

on the basis of direct instructions in legislation (for example, a mortgage by force of law);
on the basis of a contract or agreement between the owner and other persons (for example, a lease agreement);
on the basis of orders from local administrative or state bodies (including guardianship and trusteeship authorities);
based on a court decision.

Some encumbrances allow the sale of an apartment , and some do not. For example, an apartment pledged against a loan can be sold with the consent of the mortgagee (creditor). But it will not be possible to sell an apartment with a seizure; Rosreestr will not register the transfer of ownership.

How to apply for a deposit when buying an apartment - see this article.

Encumbrances of rights NOT registered in Rosreestr

Not all encumbrances of rights are registered in Rosreestr. For example, the rights to use an apartment (for more details, see the link in the Glossary) also encumber the property, but are not subject to registration. Why is that? Hard to tell. This is how it happened, and this must be taken into account.

about the availability of rights of use (residence, “registration at the address”) from a special document - Extracts from the House Register. What it looks like, where and how to get it - see the link.

In addition, Rosreestr does not register the encumbrance of an apartment with a commercial lease if the contract is concluded for a period of less than a year .

There are other rights encumbering an apartment that people who are not its title (i.e. registered) owners have. For example this:

the right of a spouse to common property (when the apartment is registered in the name of only one of the spouses);
right of inheritance (when the apartment is registered in the name of one heir, and the other heir has not yet exercised his right to it);
right of first refusal to purchase a share of an apartment (when a share of common property is sold without the consent of the owners of other shares).

In all these cases, people who are not formally the owners of the apartment (or its share) can claim their rights to it even after its sale. Then the transaction may be declared invalid, and the Buyer will lose his ownership rights.

Peculiarities of purchasing an apartment previously purchased with maternity capital funds. What is the danger here for the Buyer?

Purchase and sale of an apartment with an encumbrance

Despite the existing risks, citizens consciously buy apartments that are under encumbrance. As a rule, this applies to real estate purchased under a mortgage agreement. Some banks agree to such transactions, but the owner must coordinate these actions with the management of the organization and obtain approval.

Many buyers ask the question: is it worth taking out a mortgage encumbrance? There is no clear answer to this. We can only recommend discussing this issue with employees of the bank where the mortgage loan agreement was drawn up, as well as consulting with a professional lawyer.

It is not recommended to buy an apartment that is under arrest or encumbrance under a lease (rent) agreement. The seller should take care of removing restrictions in advance. If this does not happen, the buyer must refuse the transaction, no matter how tempting the price of the property.

The purchase and sale of an encumbered apartment is carried out according to standard rules. The parties must draw up an appropriate agreement with a notary, visit the banking organization or government agency that imposed the restriction in advance, and obtain permission to conduct the transaction.

Having bought an apartment with an encumbrance, the new owner must understand that all existing restrictions “fall on his shoulders.” From the moment of registration of ownership of real estate in Rosreestr, debts also become his property. This means that you will have to pay off the mortgage loan or pay off the debt. The new owner of the apartment can try to remove the encumbrance and clear the debts in court, but this is quite difficult. In resolving this issue, there is a high probability that the judge will side with the defendant, i.e. an organization or individual with whom an agreement has been entered into that facilitates the imposition of restrictions on the use of real estate.

It is worth saying that when buying an apartment under a mortgage encumbrance, in order to obtain permission to re-register it, you will have to enter into an agreement with the bank. Otherwise, the financial organization has the right to file a lawsuit to invalidate the transaction.

How to find out if there is an encumbrance on an apartment?

If we are talking about registered in Rosreestr , then anyone can check this - this is publicly available information.

reliably find out from the address of the apartment whether it has any registered encumbrances (restrictions on rights) in two ways:

make an online request for information on a real estate property via the Internet on the Rosreestr website, in the section “Reference information about real estate objects online” - here; or
order an Extract from the Unified State Register (EGRN) on the same website of Rosreestr (here), or in the MFC “My Documents” or on our website (HERE).

In the first case, information is provided instantly and free of charge . a brief information certificate about the area of the apartment and its cadastral value is issued online And in the column “Rights and restrictions” you can see the number and date of the document confirming the registration of ownership of the apartment, as well as encumbrances , if any.

True, it happens that some information from this “online window” and from the official Unified State Register of Real Estate does not coincide (a mysterious phenomenon that leads to a stupor). Therefore, experienced realtors always rely on the data from the official extract from the register .

In the second case, the information is provided in the form of an official document - in electronic form (with an electronic digital signature) or in paper form (with the official seal of Rosreestr). Such a document is much more serious and reliable, and it is issued for a fee (current price tags are here).

The deadline for receiving the Unified State Register Extract depends on the method of ordering it. When contacting Rosreestr offices, the receipt period is up to 3 working days. When contacting the MFC – up to 7 working days. When ordering an Extract from the Unified State Register of Real Estate through our website, you can receive it within an hour (approximately).

Apartment fraud. Instructive stories with practical examples.

In the official Extract from the Unified State Register of Real Estate, in the section “Information on registered rights”, a separate block indicates “Limitation of rights and encumbrance of the property . It indicates the type of registered encumbrance, the number and date of its registration, as well as information about the individuals or legal entities in whose favor this encumbrance was established, and the basis on which it was imposed.

If there are no , then in this block of the Unified State Register of Real Estate we will see the phrase “not registered.”

You can see how it looks in the extract itself on our website - in the section “Samples of documents for the secondary market” .

If the Buyer has discovered a registered restriction/encumbrance in the extract from the register, then he should demand that the Seller of the apartment resolve this issue and remove this encumbrance before the transaction . True, there are cases when you can deliberately buy an apartment with an encumbrance (more on this below).

How to find out if the encumbrance on an apartment has been lifted? Very simple. First, we find out from the Seller whether he has resolved this issue, and then we check. For example, he paid off his debts and lifted the seizure of his real estate (apartment). To check this, we need to order a fresh Extract from the Unified State Register again, and make sure that in the column “Limitation of rights and encumbrance of the property” the phrase “Not registered” is indicated.

As for unregistered encumbrances and the possible existence of third party rights to the apartment, this is more difficult to detect. The buyer will have to understand the title documents, go through all the stages of preparing the transaction and make sure of the “legal purity” of the purchased apartment. There are detailed STEP-BY-STEP INSTRUCTIONS .

And to control the correctness of his actions, the Buyer will need additional legal advice in relation to the conditions of a specific transaction.

Which Sellers are better not to buy an apartment from and why – see this article.

Apartment with an encumbrance: summing up

The imposition of an encumbrance does not allow the apartment owner to fully dispose of his property. He cannot formalize a contract of sale or gift, legally. An encumbrance is placed on real estate for various reasons, including purchasing an apartment with a mortgage, signing a lease agreement, and having debts to government agencies. The restrictions are temporary and are lifted immediately after the cause of the imposition is eliminated.

Our lawyers will answer your question! To make a decision in your specific situation, please contact a specialist through the online consultant form or by phone:

Moscow and region: +7(499) 577-00-25 ext. 691 St. Petersburg: +7(812) 425-66-30 ext. 691 All regions of the Russian Federation: 8(800) 350-84-13 ext. 691 It's fast, free and confidential!
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Is it possible to sell an apartment with an encumbrance?

Can. But be careful. And not always. For example, you cannot sell an apartment that has been seized. In most other cases, an encumbrance allows the transfer of ownership of the property while preserving the encumbrance itself (such as a mortgage).

Selling an apartment with an encumbrance is a normal (albeit rare) market practice. The main thing is that the Buyer knows about this and understands that his ownership rights will be limited (constrained) until the encumbrance is lifted.

Apartments with encumbrances are bought , for example, in the following cases:

The seller of the apartment has not yet paid off the mortgage loan for it, and is selling it along with the debt and collateral (encumbrance);
The buyer bought the apartment in installments (until the full amount is paid, the apartment is pledged to the Seller);
The apartment is sold together with the tenants living in it under a lease agreement (the Buyer takes the place of the lessor);
The apartment is sold encumbered with rent (the Buyer takes the place of the rent payer, with the consent of the rent recipient).

If the apartment is sold with any encumbrance, it must be reflected in the Apartment Purchase and Sale Agreement as a separate clause. And in the case of a mortgage , a separate loan agreement between the Buyer and the bank is also concluded.

How to sell an apartment with a mortgage - see a separate note.

Advantages of buying an apartment with an encumbrance

No one in their right mind would sell urgently and lose money. Such a decision is usually influenced by difficult circumstances. But an urgent purchase transaction through the MIEL agency on Chistye Prudy results in significant advantages for the seller:

Encumbrance on an apartment. What is this?

An encumbrance is a special form of seizure that is placed on property or real estate. Essentially, a limit is imposed on certain actions that are in any way related to the premises. These restrictions on property may appear in different situations: at their own request, regardless of the wishes of the owner. In the first case, this may be a mortgage of a residential premises, when a person independently decides and imposes an encumbrance. In the second case, it may be a bank arrest for non-payment of a loan.