Quick Answer
An encumbrance is a claim, right, restriction, lien or other interest affecting real property. Some encumbrances involve money (like mortgages and judgment liens), while others affect how the property can be used or enjoyed (like easements and deed restrictions).
When you buy real estate, you are not just buying the physical land and buildings. You are buying a bundle of rights. Encumbrances are interests or restrictions that may affect that bundle. Understanding encumbrances helps you know exactly what you are getting.
Common Examples of Encumbrances
Liens (Financial Encumbrances)
Mortgages, tax liens, judgment liens, mechanic's liens, and HOA liens are all encumbrances. They represent financial claims against the property. See what is a property lien for a full overview of lien types.
Easements
An easement gives someone the right to use a portion of the property for a specific purpose. Common examples include utility easements (for power lines or water pipes), access easements (for a neighbor to reach their property), and drainage easements. Easements do not involve money, but they affect how the property can be used.
Deed Restrictions and Covenants
Deed restrictions and covenants limit how the property can be used. These may restrict building heights, property use, architectural styles, or other activities. They are recorded in the chain of title and bind successive owners.
HOA Restrictions
Homeowners associations often impose restrictions through recorded declarations. These can include architectural guidelines, landscaping requirements, rental restrictions, and other rules. See HOA liens for the financial side of HOA obligations.
Certain Leases
A recorded lease can be an encumbrance on the property, particularly a long-term lease that affects the buyer's ability to occupy or use the property.
Are All Encumbrances Bad?
No. Many encumbrances are routine and do not negatively affect the property's value or use. A utility easement for a power line is standard on most residential properties. A shared driveway easement between two neighbors is common and serves an important purpose. The key is understanding what encumbrances exist and how they affect the property, so you can make an informed decision.
Why Does Title Review Encumbrances?
The title examination process identifies encumbrances so buyers understand what rights and restrictions come with the property. The title commitment's Schedule B lists exceptions to coverage, including easements, restrictions, and other encumbrances that will not be insured against. This is why reviewing title exceptions is critical before closing.
Lien vs. Encumbrance
A lien is generally a financial claim securing a debt. An encumbrance is the broader category. Every lien is an encumbrance, but not every encumbrance is a lien. For a detailed comparison, see our article on lien vs. encumbrance: what's the difference.
FAQs
Do encumbrances need to be removed before selling?
Financial encumbrances (liens) generally need to be paid and released. Non-financial encumbrances like easements and restrictions typically stay with the property and pass to the new owner.
Can an encumbrance prevent me from building on my property?
Yes. A conservation easement, setback restriction, or utility easement may limit where you can build. Always review the title commitment's exceptions before starting construction.
How are encumbrances discovered?
Through a professional title search of public records. Title examiners review deeds, plats, easement documents, and other recorded instruments to identify encumbrances affecting the property.