What Is an Encumbrance in Real Estate?
- Hoozzee
- Apr 4
- 2 min read
An encumbrance is a legal claim or restriction on a property that can limit how it’s used or decrease its value. It doesn’t necessarily mean the owner doesn’t have full rights—but it does mean there are conditions that might affect how the property is sold, transferred, or developed.
Common Types of Real Estate Encumbrances
1. Liens
Liens are financial claims placed on a property, usually due to unpaid debts. If a homeowner fails to pay their mortgage, taxes, or contractor, a lien might be filed. This means the property cannot be sold without settling that debt.
Examples:
Mortgage liens
Tax liens
Mechanics liens (from contractors)
2. Easements
An easement gives another party the legal right to use a portion of the property for a specific purpose—most commonly, access.
For example, if your neighbor’s driveway crosses your land, that’s likely an easement.
3. Encroachments
Encroachments happen when someone builds or extends something onto another person’s land—like a fence, shed, or even a part of a house. This can lead to legal disputes and affect future sales.
4. Deed Restrictions
These are private agreements that limit how a property can be used. Often found in HOA communities, they might restrict things like fence height, exterior paint colors, or whether you can run a business from your home.
How Encumbrances Affect Property Value
Encumbrances can:
Delay or prevent sales
Reduce property value
Create legal complications
Require title insurance or clearance
When buying property, a title search is key to uncover any existing encumbrances. You want to know exactly what you're getting into before signing anything.
Are All Encumbrances Bad?
Not at all. Some encumbrances, like utility easements, are completely normal and even necessary. But others—especially financial liens or legal disputes—can create serious headaches.
It’s all about understanding what’s attached to the property and how it affects your plans.
Final Thoughts
Understanding what an encumbrance is in real estate is essential whether you’re buying, selling, or simply owning property. I found that once I learned to spot these red flags—or green lights—it made navigating real estate decisions way less stressful.
Always consult with a real estate attorney or title expert if you're unsure. Because in real estate, what you don’t know can cost you.