An interest in an asset that is held by another part as a limit on how an owner can use it. It constitutes a claim (e.g., a mortgage) on property or assets to the benefit of a lender/ creditor. It is a third party’s right to, interest in, or legal liability on property that prohibits the property’s owner from transferring ownership title. Encumbrance usually restricted the asset’s transferability and/ or use until it is removed.
Common types of encumbrances against real property include liens, easements, leases, mortgages, or restrictive covenants.
Encumbrances may take many form: financial encumbrances or non-financial encumbrances.
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