What effect does a "blanket encumbrance" have on the sale of timeshares?

A blanket encumbrance refers to a lien or claim against the entire property rather than individual units, which is common in timeshare developments. This encumbrance can complicate the sale process because it signifies that there are obligations, such as loans or other debts, associated with the property as a whole. When there’s a blanket encumbrance, potential buyers and financial institutions may view this as a risk, leading to scrutiny regarding the project's financial stability.

For a sale to close, especially in the context of timeshare sales, it is often a prerequisite that the property be clear of encumbrances. This is crucial because lenders and buyers need assurance that they are acquiring a property without outstanding debts that could transfer to them after the sale. If the project is burdened with a blanket encumbrance, escrow may not be able to close until these issues are resolved, which is why this option highlights the significant impact that a blanket encumbrance has on the transaction.