- Meaning of Encumbrance
- Types of Encumbrance
- What are other usages of encumbrance?
- How to apply for an Encumbrance Certificate?
Meaning of Encumbrance
Encumbrance is a term that is frequently used to claim against a real estate property, usually by a third party or person. Here, the third party doesn’t pursue any proprietorship right or ownership of the property, then also encumbrance powers up the third party to restrict any further transfer of that real estate property. So, in other words, when someone willingly desires to restrict the transferability of that land or property, then the encumbrance comes into the figure. Other than real estate property, there are many places where one can claim the encumbrance, such as mortgages, property tax liens, easements, etc.
Interestingly, if you have noticed, then one of the examples of encumbrance mentioned here, i.e., easement, represents a non-financial encumbrance. It means that an encumbrance comprises financial and non-financial examples. Usually, encumbrance is used in commercial cases.
Types of Encumbrance
As we have already covered that the usage of encumbrance is not restricted to financial matters only, it also entitles various non-financial usages of encumbrance.
Give a quick glimpse at the various types of encumbrance mentioned below:
Deed restrictions
A deed restriction, popularly known as a restrictive covenant, is a limitation that restricts the activities or transfer of property. It is a typical example of encumbrance that limit the construction or transfer of any real estate property. This restriction involves the deed-restriction community, which is named as a homeowners association (HOA).
Lien
The lien is another common example of encumbrance, which lets the asset owner borrow a loan for making a purchase of real estate or assets. Further, a lien is an encumbrance that is placed by the financial institution on the real estate or asset for which the loan is borrowed.
Encroachment
The third type of encumbrance that most property owners don’t want is an encroachment on their properties. The encroachment encumbrance allows an intrusion of another’s property beyond the acceptable limit.
Easement
The easement encumbrance involves a nonpossessory right in exchange for some fee. It helps the land owner’s beneficial enjoyment of entering or using the neighbor’s land as a legal servient owner.
What are other usages of encumbrance?
The other usages of encumbrance are precisely listed below:
- In management accounting
- In Colleges & universities
- As Intellectual property
How to apply for an Encumbrance Certificate?
Form 15 and Form 16 are two examples of encumbrance certificates that buyers need to submit to the financial institution or bank offering loans on property purchases.
Buyers can get an Encumbrance Certificate online at the official website of the respective State’s land registration where the property is situated. Check out the step-by-step process to get the certificate here:
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Visit the respective website and apply for getting an Encumbrance Certificate.
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Input the requisite information and details popping up in the window and press the “save” or “update” button.
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Input the desired duration of the Encumbrance Certificate and evaluate the charges by pressing the “Calculate Fee” button.
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Once the fee is paid, an ‘Acknowledgment’ window will pop up. Click on the “View Acknowledgement.” You may also print a hard copy of the payment.
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After this, an authoritative person of the respective State’s land records department comes to inspect and validate the information and proofs that the property’s buyer has submitted.
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Once the authoritative person is satisfied with the inspection process, an Encumbrance Certificate for a particular property will be issued to the buyer for the specified period.