What is an encumbrance in real estate?

An encumbrance in real estate refers to any claim or lien that limits property rights or value. This concept is significant because encumbrances can affect a property owner's ability to utilize or transfer their property freely. Common examples of encumbrances include mortgages, easements, and liens. Each of these can impose certain obligations or restrictions on how the property can be used or encumber the property's title.

Understanding encumbrances is crucial for potential buyers, sellers, and real estate professionals, as they can impact transactions significantly. For instance, if a property has a lien due to unpaid taxes, the new owner may inherit this debt unless resolved. Thus, recognizing what constitutes an encumbrance helps stakeholders make informed decisions about property purchases and management.