Encumbrances in Real Estate: What Every Buyer Should Know

Encumbrances can impact a property’s value, usability, and even resale potential. That’s why you need to be aware of encumbrances in real estate and how they can impact you. Read this post by Riva Title Company in Miami, FL for more information.

When buying a home, it’s important to understand not just the property itself but also any legal restrictions that may affect its use. One key concept that all homebuyers should be aware of is encumbrances—legal claims, liabilities, or restrictions that can impact ownership or property rights. Whether you’re purchasing a home or investing, knowing about encumbrances in real estate can help you avoid unexpected surprises and potential legal issues.

Call Riva Title Company in Miami, FL at 786-787-7888 for the title services you need for a safe real estate process.

What Is an Encumbrance?

An encumbrance is any legal claim, restriction, or liability that affects a property’s value or use. While an encumbrance does not necessarily prevent the transfer of ownership, it can place limitations on what the property owner can do. Encumbrances can be financial (such as a lien) or non-financial (such as an easement or zoning restriction).

Encumbrances typically stay with the property even after it is sold, meaning that new owners inherit these legal obligations unless they are removed or resolved.

Types of Encumbrances in Real Estate

1. Liens

A lien is a legal claim placed on a property by a creditor as security for a debt. If the debt is not paid, the lienholder may have the right to foreclose on the property. Common types of liens include:

Mortgage Liens – Created when a homebuyer takes out a mortgage. The lender holds a lien on the property until the loan is repaid.
Tax Liens – Imposed by the government if a property owner fails to pay taxes. Tax liens take priority over other debts.
Mechanic’s Liens – Filed by contractors or workers who were not paid for work done on the property.
Judgment Liens – Result from court rulings where the property owner owes money to a creditor.

Impact on Buyers: Liens must typically be paid off before a home can be sold, but some liens can carry over to the new owner if not properly addressed. A title search can help identify existing liens before closing.

2. Easements

An easement is a legal right that allows another party to use a portion of a property for a specific purpose, even though they do not own it. Common types of easements include:

Utility Easements – Grant utility companies access to install and maintain infrastructure such as power lines and water pipes.
Private Easements – Allow a neighbor or another party to use part of the property, such as a shared driveway.
Easements by Necessity – Typically granted to landlocked properties that require access to a public road.

Impact on Buyers: Easements can limit how a property is used, such as restricting where you can build structures. Easements generally transfer with the property upon sale.

3. Deed Restrictions (Restrictive Covenants)

Deed restrictions are private agreements that limit how a property can be used. They are often imposed by developers or homeowners associations (HOAs) to maintain a community’s look and feel. Examples include:

Prohibiting certain types of construction or modifications (e.g., no fences above a certain height).
Banning commercial use of residential properties.
Regulating home colors, landscaping, or parking.

Impact on Buyers: Buyers should review deed restrictions before purchasing, as they may be legally binding and enforceable by an HOA or neighborhood association.

4. Encroachments

An encroachment occurs when a structure or improvement—such as a fence, shed, or tree—extends onto a neighboring property without permission.

Impact on Buyers: Minor encroachments may not be an issue, but serious cases can lead to legal disputes. A property survey can help identify encroachments before purchase.

5. Zoning Restrictions

Zoning laws regulate how land can be used, such as designating areas for residential, commercial, or industrial purposes. Some zoning restrictions may:

Limit the type or size of structures allowed on the property.
Prohibit running certain businesses from a home.
Restrict the number of rental units allowed on a lot.

Impact on Buyers: Buyers planning to renovate or use a property for a specific purpose should check local zoning laws before purchasing.

Call Riva Title Company in Miami, FL at 786-787-7888 to learn how they can assist you in addressing encumbrances.

How to Identify and Address Encumbrances

1. Conduct a Title Search

A title search, performed by a title company or attorney, will reveal recorded encumbrances such as liens, easements, and deed restrictions.

2. Obtain a Land Survey

A land survey helps identify encroachments, easements, and property boundaries, ensuring there are no surprises.

3. Review the Title Insurance Policy

Title insurance protects buyers against certain encumbrances that were not disclosed before closing.

4. Consult a Real Estate Attorney

If a property has complex encumbrances, a real estate attorney can help you understand your rights and options.