Encumbrance
Any registered claim, charge, or restriction on a property's title that may affect the owner's ability to use or transfer the property freely.
What is a Encumbrance?
An encumbrance is a broad legal term for anything registered against a property's title that limits the owner's rights. Common encumbrances in New Zealand include mortgages, easements, covenants, caveats, liens, and statutory charges (such as unpaid rates or a council charge for works).
Encumbrances are recorded on the certificate of title as 'memorials' — entries that alert anyone searching the title to the existence of the interest. Some encumbrances are routine (almost every property with a home loan has a mortgage registered), while others can significantly affect what you can do with the property.
Not all encumbrances are negative. A registered easement for utility access, for example, is a normal and necessary part of urban property. The key is understanding what each encumbrance means for your intended use of the property.
Why It Matters for Due Diligence
Every encumbrance on the title must be understood before you commit to buying. Some encumbrances will be discharged at settlement (like the seller's existing mortgage), but others carry over to you as the new owner (easements, covenants, statutory charges).
Your lawyer should explain every memorial on the title and obtain copies of the underlying instruments. Pay particular attention to encumbrances that could affect your plans — for example, a building line restriction that prevents you extending, or a council charge for infrastructure that you'll need to pay.
How to Check
All encumbrances are listed on the certificate of title, which you can order from LINZ. Each encumbrance references an instrument number — your lawyer should obtain and review the full instrument to understand the specific rights and obligations.
The LIM report may also reveal council-related encumbrances or statutory charges that affect the property.
Frequently Asked Questions
Will the seller's mortgage still be on the title when I buy?
No. The seller's mortgage is discharged (removed from the title) at settlement. Your lawyer ensures this happens as part of the settlement process. Your own mortgage, if you have one, will be registered in its place.
Can I buy a property with encumbrances on it?
Yes, and almost every property has some encumbrances. The key is understanding what they are and whether they affect your plans. Some encumbrances are routine and harmless; others can be deal-breakers. Your lawyer will advise you on each one.
Related Terms
Certificate of Title
GlossaryThe official legal document registered with LINZ that proves who owns a property and records all registered interests affecting it.
Easement
GlossaryA legal right allowing someone to use part of another person's land for a specific purpose.
Covenant
GlossaryA legally binding restriction or obligation attached to a property's title that controls how the land can be used.
LIM Report
GlossaryA Land Information Memorandum — an official council report summarising everything the council knows about a property.
Freehold
GlossaryThe most complete form of property ownership in New Zealand, giving the owner full rights to both the land and any buildings on it.
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