Whether you own a house or are looking to buy property, you have to accept that you will have some limits as a homeowner. This limit is all about encumbrance.
What Is an Encumbrance in Real Estate?
An encumbrance is a set of limits regarding how they can utilize the property they are the legal owner. This claim is bought by the party who is not the owner of the property. They are trying to limit the use of the property by the actual owner. This can create a cloud on the title of the property. This type of limit can also allow the property buyer to back out of the sale. And also, the way to seek damages in some jurisdictions.
Effects of Encumbrance
Some encumbrance can affect the value of the property in a way that it becomes unwanted to the clients. Most of them don’t. A zoning law is one example of an issue where it is used positively, the owners welcome it. This is done so the property cannot be used for commercial space. Others can be more troublesome, like liens placed on a property that seeks repayment of debt. Moreover, an encumbrance can affect the transferability of a property. Which will restrict its free use until it is lifted.
Why is this important for real estate owners?
This concept is there to protect the interest of the property owners of the area. Usually, for tax-paying issues, this concept can be used. It is difficult to transfer an encumbered property. So, the property owner has a strong incentive to settle the underlying claim, and doesn’t have to worry about selling the property to others.