Encumbrance

What Is an Encumbrance?

An encumbrance is any right or interest in real property held by someone other than the owner that limits the owner's use, value, or marketability. Encumbrances do not necessarily prevent transfer of the property, but they generally pass with the land to a new owner unless cleared at closing. Identifying and resolving encumbrances is a primary objective of a title search.

Common Types of Encumbrances

• **Mortgages and deeds of trust** securing loans - **Mechanic's liens** filed by unpaid contractors and suppliers - **Tax liens** for unpaid property, federal, or state taxes - **Judgment liens** from court judgments against the property owner - **Easements** granting a right of use to a third party - **Restrictive covenants** limiting permitted uses or design - **Leases** that survive transfer of ownership - **Encroachments** of structures over a boundary line

Resolving Encumbrances at Closing

Buyers typically require the seller to deliver title free of monetary encumbrances at closing. Liens are paid off and released from the loan proceeds or seller's funds. Non-monetary encumbrances like easements and covenants usually remain because removing them requires the consent of the benefited party. Title insurance protects buyers and lenders against undisclosed encumbrances that arise after closing. Owners should periodically review their title to detect improperly filed liens or other clouds on title.