Investing Assets & Markets Real Estate Investing Types of Encumbrances in Real Estate Examples of the different encumbrances that may apply to property By Erin Gobler Erin Gobler Erin Gobler is personal finance coach and a writer with over decade of experience. She specializes in writing about investing, cryptocurrency, stocks, and more. Her work has been published on major financial websites including Bankrate, Fox Business, Credit Karma, The Simple Dollar, and more. learn about our editorial policies Updated on September 13, 2022 Fact checked by Hilarey Gould In This Article View All In This Article Encumbrances in Real Estate Liens Deed Restrictions Easements Encroachments Frequently Asked Questions (FAQs) Photo: kali9 / Getty Images An encumbrance is a right to or interest in a property by someone other than the owner. Encumbrances can come in many different forms, including liens, deed restrictions, easements, and encroachments. If you own a rental property, are a landlord, or are planning to buy or sell a house, it’s important to understand how encumbrances work and how they affect your right to your property or others. Key Takeaways An encumbrance is a third party’s right to or interest in a property and can be included in the property deed or title.Common types of encumbrances include liens, deed restrictions, easements, and encroachments.Certain types of encumbrances, including liens and easements, give another party a claim to or right to use your property.A deed restriction, rather than giving someone else a claim to your property, simply limits the way you can use it.An encroachment is an intrusion onto your property, but unlike other types of encumbrances, it’s unauthorized. Encumbrances in Real Estate Encumbrances can have a significant impact on landlords and owners, especially when it comes to how someone can use or sell the property. In some cases, encumbrances can reduce the value of a property or prevent the owner from selling. “While it may be impossible to avoid any encumbrances on the property entirely, it is advisable to limit encumbrances to the greatest extent possible in order to maximize the use and transferability of real estate,” Bonnie Timms, a real estate closing attorney at Cook & James in Georgia, told The Balance in an email. “Having at least a basic understanding of these common encumbrances can help property owners avoid surprises and make the most of the property they own.” Liens A lien is a third party’s legal claim to a property due to a debt that’s owed. A lien must generally be paid off before you can sell the property. And in some cases, a lien may even give the lienholder (the third party that has the legal claim to the property) the right to foreclose on the property. “The most common type of lien is a mortgage,” Timms said. “The mortgage lender will place a lien on the subject property when it provides the loan funds used to purchase the property.” While a mortgage is the most common type of lien, it’s not the only one that property owners may face. Contractors can place what’s called a “mechanics lien” if the property owner failed to pay for the labor and supplies that were provided, according to Timms. Additionally, the government can place a tax lien if you have unpaid taxes. Note Like a mortgage lender, the federal government may eventually seize a property if the debt isn’t paid. However, this usually only happens in extreme cases. Deed Restrictions A deed restriction is a stipulation in a property deed that limits how you can use your property. A deed restriction follows the property, meaning even if the owner sells, the next owner will be subject to the same restriction. “The source of a deed restriction may be a homeowners association, the builder of a home, or a local governing body,” Timms said. “It's important to know what deed restrictions may be in effect on a property before you purchase it, since deed restrictions can affect how you use your property.” A common example of when deed restrictions come into play is if you have a homeowners association in your neighborhood. Your HOA rules may limit residents from building fences or other structures in their homes, limit the colors you may paint your home, and more. Easements Unlike other types of encumbrances, an easement doesn’t necessarily limit your right to or use of your own property. Instead, it gives another party the right to access it with or without your permission. “One common type of easement is a utility easement, which allows utility companies to access a property belonging to another for a specific purpose,” Timms said. “For example, a water company might have an easement to run water pipes under your property.” An easement could also give a neighbor the right to use your property. For example, suppose your neighbor doesn’t have access to their property from the road. Instead, there’s an easement that allows them to use your driveway. Note Like deed restrictions, easements follow the property, making it especially important to be aware of them before buying a property. Encroachments An encroachment is an intrusion on a neighboring property without the homeowner’s permission or other legal authorization. Unlike the other types of encumbrances discussed, an encroachment is the only one that doesn’t technically give the third party the right to the property, but they’ve encroached on it anyway. “A minor encroachment may be an overgrown garden or hedge from a neighboring property that crosses onto your land,” Timms said. “While this type of encroachment may be easy to remedy by pruning the hedge, other encroachments, such as a neighbor's fence or home addition that extends onto your property, can be a bigger challenge.” There are several ways to deal with an encroachment. And as Timms said, the remedy will depend on the severity of the encroachment. Possible solutions could include negotiating with a neighbor to have them remove the encroachment, selling the relevant land to the neighbor, or granting the neighbor an easement, which will give them the right to continue using the land if and when you sell your property. Note If you’re unsure if an encroachment has taken place, consider having a survey of your property done and familiarizing yourself with the property lines. Frequently Asked Questions (FAQs) What distinguishes a lien from other types of encumbrance? A lien is a type of encumbrance, but an encumbrance is not always a lien. A lien is when someone has a legal claim to a property due to a debt that’s owed. An encumbrance is a right to or interest in a property by someone other than the owner, and that can be in the form of a lien, but also as a deed restriction or an encroachment. While a lien is a legal claim to a property, an encroachment does not give the third party the right to the property. How do you check a property’s encumbrance online? One of the most effective ways to check if a property has any encumbrances is through a title search. This search, usually done by a title company or attorney, involves a public records search for liens, deeds restrictions, and other encumbrances on the property. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Cornell Law School, Legal Information Institute. “Encumbrance.” Door County, Wisconsin. “Definitions of Real Estate Terms.” FDIC. “Obtaining a Lien Release.” IRS. “Understanding a Federal Tax Lien.” New York City Department of Planning. “Step 3: Preparation of Land Use and Environmental Applications.” Cornell Law School, Legal Information Institute. “Encroachment.” First American. “The Title Search Process.”