An encumbrance is a claim, lien, or impediment on a property by another party that affects the transferability of the property, but does not restrict it. It generally results in a reduction in the value of the concerned property.
Any kind of liability or claim on a real property, including an easement, outstanding mortgage, or property tax that can affect the sale of the property is considered an encumbrance. Encumbrance affects the clarity of a good or marketable title. The value of a property with an encumbrance is usually lower than the value of a similar property which is free and clear from any kind of claims or liens. Although mostly used for real property, it can also affect other types of tangible property.