What does the term "encumbrance" mean in real estate?

The term "encumbrance" in real estate refers to a claim or liability against a property. This includes any legal claim against the property that may affect the owner's ability to transfer ownership. Encumbrances can come in various forms, such as mortgages, liens, easements, or restrictions on how a property can be used. They are essential to understand because they can impact the marketability of the property and the rights of the owner regarding how the property can be sold or developed.

For instance, if a property has a mortgage, the lender has a financial interest in that property until the mortgage is paid off, thereby encumbering the property. Similarly, if there are easements that allow others to use a portion of the property for specific purposes, the property's usage is encumbered by those rights.

Understanding encumbrances is crucial for potential buyers and owners, as these claims can create obligations or limit the freedom of action regarding the property.