What is an encumbrance?

An encumbrance refers to a claim or right against a property that can affect the owner's ability to transfer ownership. This definition aligns with the concept of securing a loan against a property, such as a mortgage, where the lender has a legal claim if the borrower defaults on repayment. Similarly, a lien is another common type of encumbrance, which is a legal right or interest that a lender or service provider has in the property until the debt obligation is satisfied. Therefore, encumbrances can influence the property's marketability and desirability, as potential buyers might consider the existence of any claims when evaluating the overall value and transferability of the property.

The other options refer to distinct concepts unrelated to the definition of an encumbrance. A type of property insurance requirement pertains to protection against risks rather than claims on the property. A physical barrier to property access describes a situation that may restrict access but doesn’t involve legal claims or interests in the property itself. Finally, a formal appraisal of property value involves evaluating and determining market worth, rather than indicating any limitations or claims against the property.