What is an encumbrance in relation to property?

An encumbrance refers to a claim or lien on property that can affect the owner's ability to transfer clear title. This concept is essential in real estate because encumbrances can encroach upon the rights of the property owner and may come in various forms such as mortgages, easements, or property tax liens. When a property is encumbered, it means that there are legal obligations or restrictions associated with it, which need to be resolved before a clear title can be conveyed to a buyer.

Understanding encumbrances is critical for auctioneers because they must disclose any known encumbrances to potential buyers to ensure transparency and protect against future legal issues that could arise from hidden claims against the property.