Encumbrance

An encumbrance is a financial claim or lien on a piece of real estate that complicates the titling process. Generally, encumbrances are a right or financial interest in a piece of property that diminishes its value. Encumbrances do not interfere with the passage of title from one person to another, but there is a value diminishment. A variety of different encumbrances exist, and they can be financial or non-financial. Financial encumbrances may be a lien for work that was performed on a property and never paid. Non-financial encumbrances are best seen in a concrete example. Say you have a great piece of country acreage that is in a superb location. You purchase the property, but you have to agree on an encumbrance. Because the neighbor has no access to the local road, your property is encumbered to allow them access. This simply means that your neighbor has full rights to drive across your property whenever he or she wants.