What does the term "encumbrance" refer to?

The term "encumbrance" specifically refers to a claim or liability that is attached to a property, which can affect the property's transferability. This can include various types of legal claims, such as mortgages, liens, easements, or restrictions. For example, if a property has a mortgage, the lender holds an interest in the property until the mortgage is paid off. This encumbrance must be resolved before a new buyer can take full ownership and control of the property without any pre-existing claims.

Understanding encumbrances is critical in real estate transactions, as these claims can impact the value of the property and the rights of the parties involved. Buyers need to be aware of any encumbrances before making a purchase, as these claims can limit their rights or impose obligations, such as in the case of easements, which allow others to use part of the property for specific purposes. In essence, recognizing an encumbrance is key to ensuring clear and transferable ownership in real estate transactions.