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Simple English definitions for legal terms
encumbrance
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A quick definition of encumbrance:
An encumbrance is when someone else has a claim on something that you own. This can happen with things like houses or land, where there might be things like loans, leases, or restrictions that affect how you can use or sell the property. Basically, it means that you don't have complete control over the thing you own because someone else has a say in what happens to it.
A more thorough explanation:
An encumbrance is a legal claim against an asset that limits the owner's ability to use or transfer the asset. This claim is made by an entity that is not the owner of the asset.
For example, if you take out a mortgage to buy a house, the bank has an encumbrance on the property until you pay off the loan. This means that you cannot sell the house without paying off the mortgage first. Other common types of encumbrances include liens, easements, leases, and restrictive covenants.
Liens are claims against an asset for unpaid debts, such as unpaid taxes or unpaid bills. Easements are rights granted to someone else to use a portion of the property, such as a right-of-way for a utility company. Leases are agreements that allow someone else to use the property for a specified period of time. Restrictive covenants are agreements that limit the use of the property, such as prohibiting certain types of businesses from operating on the property.
Encumbrances can impact the value and transferability of the asset. For example, if a property has a lien against it, potential buyers may be hesitant to purchase the property until the lien is paid off.