Define: Encumbrance

An encumbrance in legal terms refers to any claim, lien, charge, or restriction on a property that affects its value or limits its use, ownership, or transferability. Encumbrances can arise from various sources, including legal agreements, financial obligations, or governmental regulations, and they may have implications for property ownership and transactions.

Common examples of encumbrances include mortgages, easements, liens, restrictive covenants, and property taxes. A mortgage is a common type of encumbrance where a lender has a claim on the property as security for a loan. Easements grant someone the right to use the property for a specific purpose, such as accessing a neighbouring property. Liens represent a creditor’s claim on the property to secure payment of a debt. Restrictive covenants impose limitations on how the property can be used, such as prohibiting certain activities or structures. Property taxes are a government-imposed financial encumbrance on property owners.

Encumbrances can affect property ownership rights, transferability, and marketability. Before purchasing or selling property, it is essential to identify and understand any encumbrances affecting the property to avoid legal disputes or financial liabilities. Additionally, encumbrances may be removed or modified through legal proceedings, such as lien releases, easement abandonment, or court orders.

An encumbrance on the Title to land or property is any interest — legal or equitable — that detracts from the owner’s ability to enjoy the land or property without hindrance. Encumbrances range from a long Lease made out of the property, to an Easement preventing the obstruction of light to other buildings. A prospective purchaser will be interested in such things during the Investigation of title. When an estate in land is sold, the seller will contract to provide the land free of encumbrances or, at least, with only specific encumbrances as disclosed to the purchaser. If encumbrances turn up after the sale, then strictly speaking the purchaser has an action against the seller for breach of contract. In reality, these actions are rarely successful, and the purchaser should be very careful to check for encumbrances.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March, 2024.