What is an encumbrance in real estate?

An encumbrance in real estate refers to a claim or liability attached to a property that can affect its value, use, or transferability. It represents a burden on the property that can decrease its market value or limit the owner's ability to use or sell it freely. Common examples of encumbrances include liens, easements, and certain types of restrictions or covenants that are imposed on the property.

When you understand encumbrances as claims that decrease property value, it becomes clear how they can impact the overall investment and usage of real estate. This knowledge is critical for property management and real estate transactions, as it underscores the importance of conducting thorough property title searches and due diligence prior to any sale or lease agreement.