An encumbrance, as it pertains to real estate, means any legal thing that burdens or restricts usage or transfer of the property. A property free-and-clear from any and all encumbrances is rare in many real estate circles. An encumbrance can be a mortgage (loan), a lien (voluntary or involuntary) an easement or a restriction that limits the transfer of title. An encumbrance can involve money, but not always.
Deed restrictions are a common encumbrance, private agreements that restrict the use of the real estate in some way, and are listed in the deed—hence the name. The seller may add a restriction to the title of the property. Often, developers restrict the parcels of property in a development to maintain a certain amount of uniformity. Deed restrictions also limit alterations or additions in historic districts, to maintain their historicity. Deed restrictions may be temporary or they may be based on a covenant that runs with the land. A covenant running with the land is a covenant that applies not only to the original parties but also to all of their successors with an interest in the land. Because the privity of estate requirement arbitrarily restricts the covenant to certain successors in interest, even though it should logically apply to all successors in interest, the courts have developed an alternative interpretation called equitable servitudes, based on all the requirements for a covenant running with the land except the privity of estate requirement. An equitable servitude is created by an instrument complying with the Statute of Frauds, stating that the use of the land is restricted, and giving notice of the restriction to any purchaser of the land. However, the notice can be constructive, in that the deed or other conveyance document can refer to the restriction. For instance, the restriction can be registered on a subdivision map and referenced by the deed.
Probably the most common type of easement is an easement for maintenance of utilities, but an easement could also be granted for access (right of way) to a parcel of land that is landlocked without a road. Easements are an encumbrance because they prohibit certain actions and affect rights to the property. For example, you cannot build a swimming pool over a location reserved for a city sewer line. Well, you can, but the city can dig up that swimming pool without your permission. An easement in gross is an individual interest to use the land—it benefits a person or an organization, in contrast to an appurtenant easement, which is part of the land, and transfers with it. A personal easement in gross is used to allow a neighbor to cross someone else’s land, but unlike an appurtenant easement, does not transfer with the property and ends when the owner of the easement dies.
An encroachment is an extension of some physical structure, such as a building, driveway, fence, or tree over the property lines from an adjoining property. Encroachments can affect the marketing of the title, and should be noted in a listing agreement or sales contract. Encroachments can best be determined by a spot survey, which is a survey showing the locations, sizes, and shapes of the buildings on a lot. Visual inspection is not as accurate and should not be relied upon if there is a question of an encroachment. The owner of the land subject to the encroachment can either sue for damages or have the structure extending over the property lines removed or trimmed back. However, the owner of the encroaching structure may have an easement by prescription if the time period of the encroachment exceeds the prescriptive time stipulated by state law for an easement by prescription.