What does the term "encumbrance" refer to?

The term "encumbrance" refers specifically to a claim or liability that affects a property's title. This can include mortgages, liens, easements, or other restrictions that limit the owner's ability to transfer the title freely or may affect the property's value. An encumbrance does not enhance the property but rather indicates that there are obligations or claims that need to be addressed.

Understanding encumbrances is crucial for real estate transactions, as they can complicate the title and affect the rights of buyers and sellers. Buyers typically conduct title searches to uncover any existing encumbrances before completing a purchase, ensuring they are aware of all liabilities that may diminish their rights or affect their investment in the property. This knowledge helps protect their interests and informs any negotiations or decisions regarding the acquisition of the property.