In business and legal contexts, the word encumber can conjure up a wide range of meanings, from “weigh down” to “obstruct” to “delay.” But what does encumber truly mean and how can it affect a business? Read on to discover more about encumbrance and why it’s worth taking the time to understand.
A Definition of Encumber
At its most basic level, encumber means to burden, obstruct, impede, or complicate a situation. Most often, the term is used to refer to an interest or right in a property that limits the owner’s ability to transfer the property. This is commonly referred to as an encumbrance on the title and can take the form of a mortgage, lien, easement, or other property rights.
Examples of Encumber
A clearly relevant example of encumbrance is a home mortgage. The mortgage entitles the lender to a specific property due to the loan made to the homebuyer. This means the homeowner cannot sell the property without clearing the mortgage from the title. Other examples include a lien on the property for unpaid taxes, or an easement for power lines.
Why It’s Important to Understand Encumbering
Understanding encumbering can help various parties in a property transaction. For example, buyers can make sure that any encumbrances are taken care of before they purchase the property. This protects the buyer from assuming obligations that the seller is unable to fulfill. Additionally, lenders can make sure that any mortgages they have provided for property purchases are properly filed and that buyers can’t transfer the property without dealing with the encumbrance.
The Bottom Line: What Does Encumber Mean?
Encumber is a legal term that is used to describe an interest or title that limits the owner’s ability to transfer the property. Examples of encumberance include mortgages, liens, and easements. Finally, understanding encumberance is important for buyers, sellers, and lenders, as it prevents the transfer of obligations that cannot be satisfied.