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What is encumbrance in residential real estate?

On Behalf of | Sep 28, 2023 | Real Estate Transactions

One needs to be familiar with numerous terms and concepts to navigate the real estate market effectively. Among these terms, encumbrance is a crucial one to understand.

In the context of residential real estate, an encumbrance refers to any legal claim or liability attached to a property. These claims can limit the owner’s ability to use the property freely or may impact the property’s value. Encumbrances can take various forms, and buyers and sellers must be aware of them when engaging in real estate transactions.


Mortgages are perhaps the most common type of encumbrance. When you take out a mortgage to finance the purchase of a home, the lender typically places a lien on the property.

This means that until the mortgage is paid off, the lender has a legal claim to the property. If the homeowner defaults on the mortgage, the lender can initiate foreclosure proceedings.


Easements grant specific rights to individuals or entities other than the property owner. Common examples include utility easements, which allow utility companies to access and maintain their infrastructure on your property. While easements don’t transfer ownership, they do limit certain property rights.

Property tax liens

Local governments can place liens on the property when property taxes go unpaid. These tax liens must be satisfied before the property can be sold or transferred. Buyers should investigate whether a property has any outstanding tax liens before purchasing.

Homeowners’ Association (HOA) liens

If you’re buying a property in a community governed by an HOA, you may encounter HOA liens. These liens can result from unpaid HOA fees and hinder the sale of the property until the outstanding fees are settled.

Encumbrances are a critical aspect of property ownership, and being well-informed about them is the key to success in the complex world of residential real estate. It’s best to involve a legal professional during real estate transactions for professional guidance on encumbrances.