Encumbrances in Eminent Domain

Part 3, Title 7, Chapter 10, Article 3 deals with encumbrances of divided interests in eminent domain in California. Section 1265.210 defines the term “lien.”

Section 1265.220 states that, where property acquired by eminent domain is encumbered by a lien and the indebtedness secured thereby is not due at the time of the entry of judgment, the amount of such indebtedness may be, at the option of the plaintiff, deducted from the judgment and the lien continues until the indebtedness is paid.

Section 1265.225 provides that, where there is a partial taking of property encumbered by a lien, the lienholder may share in the award only to the extent determined by the court to be necessary to prevent an impairment of the security, and the lien continues upon the part of the property not taken as security for the unpaid portion of the indebtedness.

Section 1265.230 specifies that this section applies only where there is a partial taking of property encumbered by a lien and the part taken or some portion of it is also encumbered by a junior lien that extends to only a portion of the property encumbered by the senior lien. The term 

“impairment of security” is defined.

The portion of the award that will be available for payment to the senior and junior lienholders is to be allocated first to the senior lien up to the full amount of the indebtedness secured thereby and the remainder, if any, to the junior lien.

Section 1265.240 provides that, where the property acquired for public use is encumbered by a lien, the amount payable to the lienholder does not include any penalty for prepayment.

Section 1265.250 defines the terms “fixed lien special assessment” and “special annual assessment.” If property acquired by eminent domain is encumbered by the lien of a fixed lien special assessment or of a bond representing the fixed lien special assessment, then two specified procedures must be followed. Similarly, if property acquired by eminent domain is encumbered by the lien of a special annual assessment, then two specified procedures are to be followed.