An encumbrance is simply a limitation or impediment in the ownership or rights of property ownership. While a mortgage loan is often needed to purchase a property, the legal instrument of a note, applied to the deed must be paid off before the deed can change hands, therefore encumbering the process of selling.
Encumbrances can be classified in several ways. They may be financial (ex: liens) or non-financial (ex: easements, association bylaws or deed restrictions). They may be divided into those that affect title (ex: lien or legal) or those that affect the use or physical condition of the encumbered property (ex: restrictions, easements, encroachments).
Encumbrances include security interests, liens, leases, restrictions, encroachments, and air rights or drilling / mining rights.