WHEN IS A PROPERTY SAID TO BE ENCUMBERED?
Legal Definition of Encumbered Property:
Encumbrance, also spelt incumbrance, in our context, is a legal term, specifically a real property register. There is hardly any conveyance deed (document through which ownership in property is transferred to another person) that does not contain encumbrance clause.
According to Black’s Law Dictionary, encumbrance is a claim or liability that is attached to a property or some other right that may lessen the property’s value; such as a lien or mortgage.
Technical Meaning of Encumbrance
Technically, encumbrance on a property does not have to do with ownership title but an incidental interest in the property arising from mortgage, or using the property as a collateral or security for loan. Easements are also forms of encumbrance. In other words, it is not all encumbrances that are financial obligations, example, easement or covenants running with the land.
Applied Meaning of Encumbrance in Properties
The understanding and application of the term, encumbrance has gone beyond the legal technical meaning as seen above. The meaning has expanded to include a block, impediment, or generally, any reason whatsoever that will affect the free transfer or sale of a property, including ownership dispute, fraud or crime touching the property. All of the above make the transfer of the property restrictive or totally impossible.
However, if the encumbrance has to do with any of the following: liens, easements, leases, mortgages, loan liabilities or restrictive covenants, the owner of the property can still sell or transfer his interest in the property subject to full disclosure of the existence of such encumbrances. It is therefore illegal and fraudulent to sell any encumbered property without full disclosures to the buyer. In fact, absence of such full disclosures is/are a ground(s) to rescind the contract of sale and claim of damages.
On the other hand, if the reason for the encumbrance has to do with ownership tussle, fraud/crime touching the property, none of the parties involved is eligible to sell the property until judgement or investigation in the case is concluded.
Unfortunately, cases abound where people dubiously dispose of encumbered properties without any disclosures at all; there have been cases also where properties whose titles are disputed have been sold to innocent buyers who did not know that such is in dispute. This is more prevalent in climes where record keeping/ retrieval is poor, shady and or tainted with corruption. Another reason why investors fall victim of encumbered properties is because those searching for information regarding any property have to pay through their nose in order to access information that might not be existent, and they wait for weeks to get any feedback. Due to bureaucracy in government land offices, lack of transparency, and willful/criminal negligence, land records are not updated making it difficult or impossible for any prospective buyer to get the information he/she needs touching on any land timeously.
Because of the foregoing reasons, encumberedproperties.com has come on board to close all those gaps. Encumberedproperties.com is a global online platform where anybody who has interest in any property enlists the property either as encumbered (stating the brief details of the encumbrance). It also provides for properties that are unencumbered/ undisputed but not for sale. The platform therefore protects the interest of the person enlisting the property and the interest of the innocent buyers. The ice on the cake is that the use of the platform is entirely free!
This article is put together by Madueke Enwere. In our next publication, we will bring you details and the legal implications of each type of encumbrance.