Contract Glossary
Encumbrance
Definition
A claim, lien, or restriction on property that limits the owner's ability to transfer it or use it freely. In plain English: it's baggage attached to an asset that a new buyer would inherit.
In Practice
Before you buy property or take on an asset as collateral, check for encumbrances. A house might have a mortgage lien, an unpaid tax lien, or an easement giving the neighbor access across the yard. If you don't discover these before closing, you're stuck with them.
Common in these contract types
Related terms
Frequently asked questions about encumbrance
The most common are mortgage liens, tax liens, easements, restrictive covenants (like HOA rules), and mechanic's liens from unpaid contractors. Each one limits what you can do with the property in a different way.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.