An encumbrance is any type of claim or limitation against a piece of property that impacts the owner’s ability to transfer its title. Examples of encumbrances may include a primary mortgage loan, second mortgages (including home equity loans or lines of credit), liens, easements, deed restrictions, unpaid tax liabilities, encroachments, and licenses.
Example: Richard failed to pay the property taxes owed on a piece of land he’s trying to sell and the county tax assessor’s office placed a lien on the property, creating an encumbrance.