Legal Definition of Encumbrance: A liability that lowers the value of a piece of property, such as a lien or a mortgage | Learn about the legal definition of encumbrance and how it can affect your property value. Understand various forms of encumbrances such as liens and mortgages, and their implications. Explore the importance of understanding encumbrances for accurate property valuation, avoiding legal and financial complications, and gaining negotiating power. Make informed decisions to protect your business interests