An encumbrance is a third party's right to, interest in, or
legal liability on
property that does not prohibit the property's owner from transferring
title (but may diminish its value). Encumbrances can be classified in several ways. They may be financial (for example,
liens) or non-financial (for example,
easements, private restrictions). Alternatively, they may be divided into those that affect title (for example, lien, legal or equitable charge) or those that affect the use or physical condition of the encumbered property (for example, restrictions, easements, encroachments).
[Fillmore E. Galay et al., '']Modern Real
Modern may refer to:
History
* Modern history
** Early Modern period
** Late Modern period
*** 18th century
*** 19th century
*** 20th century
** Contemporary history
* Moderns, a faction of Freemasonry that existed in the 18th century
Phil ...
Estate Practice in Illinois'', 4th edn. (Chicago: Dearborn Real Estate Education, 2001), 107. Encumbrances include
security interests, liens,
servitudes (for example, easements,
wayleaves,
real covenants,
profits a prendre),
leases, restrictions, encroachments, and air and subsurface rights.
Jurisdictions
Hong Kong
In
Hong Kong, there is statutory definition of "encumbrance". In Conveyancing and Property Ordinance (Cap. 219) it reads: "''"encumbrance" (產權負擔) includes a legal and equitable mortgage, a trust for securing money, a lien, a charge of a portion, annuity, or other capital or annual sum; and "encumbrancer" (產權負擔人) has a meaning corresponding with that of "encumbrance" and includes every person entitled to the benefit of an encumbrance, or to require payment and discharge thereof''".
Other uses
Colleges
It is also a term used by
colleges and universities to describe limitations placed on a
student
A student is a person enrolled in a school or other educational institution.
In the United Kingdom and most commonwealth countries, a "student" attends a secondary school or higher (e.g., college or university); those in primary or elementar ...
's account due to late payment, late registration, or other reasons stated by the institution. An encumbrance can prohibit students from registering for
classes, affect the release of their transcripts, or delay the reception of their
diploma
A diploma is a document awarded by an educational institution (such as a college or university) testifying the recipient has graduated by successfully completing their courses of studies. Historically, it has also referred to a charter or offici ...
s.
Accounting
In
management accounting, ''encumbrance'' is a management tool used to reflect commitments in the accounting system and attempt to prevent overspending. Encumbrances allow organizations to recognize future commitments of resources prior to an actual
expenditure.
;Pre-encumbrance: Amount expected to spend, but for which there is no legal obligation to spend. A requisition is a typical pre-encumbrance transaction.
;Encumbrance: Amount for which there is a legal obligation to spend in the future. A purchase order is a typical encumbrance transaction.
;Expenditure: Amount for which there has been an expenditure of funds. An expenditure is recorded in Commitment Control for both vouchers payable and journal entries.
Intellectual property
An example of
Intellectual property encumbrance is "encumbered code", software that cannot be freely distributed due to intellectual property rights.
References
Common law legal terminology
Property law legal terminology
Intellectual property law
Accounting terminology
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