What would be classified as an encumbrance?

An encumbrance refers to a claim, liability, or restriction on a property that can affect the owner's ability to use or transfer the property. A lien is a legal right or interest that a lender has in the borrower's property, granted until the debt obligation is fulfilled. Because a lien represents an obligation that must be settled and impacts the owner's clear title to the property, it is classified as an encumbrance.

In contrast, a signed sales agreement does not affect the property's title until the transaction is completed; it is simply a contract between the buyer and seller. A property appraisal serves to determine the value of the property for various purposes, such as sales or financing, but it does not encumber the property itself. A zoning certificate informs property owners about the zoning regulations that apply to their property, but having a zoning designation does not limit ownership like a lien does. Thus, the presence of a lien encompasses the fundamental definition of an encumbrance in property law.