209-951-7521

Encumbrance

Encumbrance is a legal term of art for anything that affects or limits the title of a property, such as mortgages, leases, easements, liens, or restrictions. Also, those considered as potentially making the title defeasible are also encumbrances. For example, charging orders, building orders and structure alteration.

Jurisdictions

Hong Kong

In Hong Kong, there is statutory definition of "encumbrance". In Conveyancing and Property Ordiance (Cap. 219) it reads: ""encumbrance" (????) includes a legal and equitable mortgage, a trust for securing money, a lien, a charge of a portion, annuity, or other capital or annual sum;and "encumbrancer" (?????) has a meaning corresponding with that of "encumbrance" and includes every person entitled to the benefit of an encumbrance, or to require payment or discharge thereof".

Other uses

Colleges

It is also a term used by colleges and universities to describe limitations placed on a student's account due to late payment, late registration, or other reasons stated by the institution. An encumbrance can prohibit students from registering for classes, affect the release of their transcripts, or delay the reception of their diplomas.

Accounting

In management accounting, encumbrance is a management tool used to reflect commitments in the accounting system and attempt to prevent overspending. Encumbrances allow organizations to recognize future commitments of resources prior to an actual expenditure.

Pre-encumbrance

Amount expected to spend, but for which there is no legal obligation to spend. A requisition is a typical pre-encumbrance transaction. Encumbrance

Amount for which there is a legal obligation to spend in the future. A purchase order is a typical encumbrance transaction. Expenditure

Amount for which there has been an expenditure of funds. An expenditure is recorded in Commitment Control for both vouchers payable and journal entries.