Encumbrance means any right or interest in land which constitutes a challenge to the right of another person over the same land.

For example, if a landlord decides to sell his house despite the fact that there are tenants in the house whose tenancy has not expired, whoever buys such house cannot lay absolute claim of ownership over the property without recognizing the right of those tenants as well. The house can be said to have been sold subject to encumbrance.
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