Definition
An encumbrance is any claim or restriction attached to a property that affects how it can be used or transferred. Liens are one common type, but easements, deed restrictions, existing leases and HOA rules also count as encumbrances. Some encumbrances, like an unpaid lien, must be cleared before a sale can close, while others, like a utility easement, simply pass along to the new owner without stopping anything. For a homeowner, it's worth understanding which category any encumbrance on your property falls into, since that determines whether it's a closing obstacle or just a disclosed detail. The title commitment prepared before closing lists every encumbrance found in the public record, giving both you and the buyer full visibility. Most homeowners are surprised to learn nearly every property has at least one encumbrance of some kind, and it rarely causes a problem.
Example
When Frank's title search came back before his closing in Reno, it listed two encumbrances: a utility easement running along the back of his lot and his existing mortgage, which still had a $95,000 balance. The mortgage was a money-based encumbrance that had to be paid off entirely from his sale proceeds before the deed could transfer. The easement, on the other hand, was a use-based encumbrance that didn't stop anything or cost him a dime. His buyer simply took the property subject to that same easement, just as Frank always had, since it had been recorded decades earlier by the local power company. The sale closed without any delay, and Frank later joked that the word "encumbrance" had sounded far scarier on the title report than either item actually turned out to be.