Also called: Encumbered, Registered interest
Encumbrance
An encumbrance is a registered claim or security interest held over an asset by someone other than the owner, most commonly a financier. It restricts the owner's ability to sell the asset with clear title until it is discharged.
What is an encumbrance?
An encumbrance is a registered claim or security interest held over an asset by someone other than the owner, most commonly a financier. It restricts the owner's ability to sell the asset with clear title until it is discharged.
Example
A PPSR search on a used van shows an encumbrance, so the buyer's funds must first clear the seller's outstanding finance.
Why it matters
Buying an encumbered asset without clearing the debt can mean the financier repossesses it from you.