What does it mean if a property is encumbered?

When a property is described as encumbered, it means that there is a claim or liability associated with it that affects the ownership. This could manifest in various forms, such as a mortgage or lien, which represents an obligation that the property owner must fulfill. When a property is encumbered, it typically indicates that the owner's rights to the property are restricted in some way due to this claim. This can impact the sale or transfer of the property, as any potential buyers would need to consider the existing encumbrances that may affect their ownership rights. Understanding this term is crucial for both property owners and prospective buyers in real estate transactions, as it directly relates to the financial responsibilities tied to the property.