What it means
Encroachments are usually discovered by a boundary survey rather than by anyone noticing at the time. They differ from an easement, which is a recorded and agreed right to use part of another person's land, because an encroachment starts as an unauthorised intrusion.
The distinction matters, since an easement is a clean legal arrangement while an encroachment is a defect waiting to be resolved. The commercial pain comes from lenders and title insurers rather than from angry neighbours.
A buyer's solicitor who spots an encroachment will raise it before completion, and a title insurer may exclude it from cover, which in turn makes a mortgage lender refuse to advance funds. Deals routinely stall for weeks while a strip of land worth a few thousand dollars is argued over.
There are four usual routes out. The parties can negotiate a formal easement or licence allowing the structure to stay, the encroaching owner can buy the affected strip outright, the structure can be moved or demolished, or in long-standing cases the encroacher may claim rights through adverse possession after undisturbed use for the statutory period.
Buying or licensing is almost always cheaper than demolition. The word carries a second, unrelated meaning in franchising.
There, encroachment describes a franchisor opening a new outlet close enough to an existing franchisee to take its customers, and modern franchise agreements often define protected territories precisely to prevent it. The two meanings share only the underlying idea of crossing a line that somebody else considers theirs.
In practice
Real-world examples.
Example
A restaurant builds a new outdoor deck that extends 2 feet onto the car park owned by the neighbouring landlord. Rather than force removal, the landlord grants a written licence at $400 a month, which costs the restaurant $4,800 a year. The licence is recorded so future buyers of either property inherit a clear arrangement.
Example
A residential developer's pre-closing survey finds that a storage shed sits 4 feet over the boundary of the plot being sold. The closing is delayed by three weeks while the seller pays $6,000 to relocate the shed and obtain an updated survey. The buyer's lender releases funds only once the corrected plan is on file.
Example
A fast-food franchisee sees the franchisor open a company-owned outlet 1.5 miles away, well inside what the franchisee considered its trading area. Annual sales fall 14%, from $1,400,000 to $1,204,000, a loss of $196,000. The franchisee raises a territorial encroachment claim under the franchise agreement.
Formula
Calculation
There is no standard formula, but the commercial decision is usually priced as: value of the encroached strip = encroached area in square feet x land value per square foot, compared against the cost of removing the structure.
A garage wall runs 3 feet over the boundary along its 40-foot length, so the encroached area is 3 x 40 = 120 square feet. Land in that neighbourhood is valued at $60 per square foot, making the strip worth 120 x $60 = $7,200.
Adding $2,500 of survey and legal fees, buying the strip and regularising the boundary costs $9,700. The builder's quote to demolish and rebuild the wall inside the boundary is $35,000, so settling with the neighbour saves $35,000 - $9,700 = $25,300 and removes the title defect permanently.Case study
Seen in the real world.
Willowmere Storage is a fictional self-storage operator, described here as an illustrative example only. Three years after expanding its site, a refinancing survey showed that a paved lorry turning area extended 11 feet onto adjacent industrial land along a 140-foot frontage, an encroachment of 1,540 square feet that nobody had noticed during construction.
The lender immediately held back $250,000 of the new facility until the title was cleared. At local land values of $18 per square foot the strip was worth $27,720, but the neighbour understood the position and held out for $34,000. With $9,000 of survey, legal and recording costs, Willowmere paid $43,000 in total.
The alternative quote to break up the paving, rebuild a retaining kerb and reconfigure the access road was several times that, and it would have taken the site out of service for a month. Willowmere paid, the lender released the holdback, and the business added a boundary survey to its standard checklist before any future groundworks.
Watch out
Common mistakes.
- Assuming that a long-standing encroachment is harmless because the neighbour has never complained, when a change of ownership on either side can revive the issue instantly.
- Confusing an encroachment with an easement, and therefore treating an unauthorised intrusion as though it were an agreed legal right.
- Skipping a boundary survey on a commercial purchase to save a few thousand dollars, and inheriting a defect that blocks the next refinancing.
Questions
People also ask.
Who is responsible for fixing an encroachment?
Responsibility normally falls on the owner of the encroaching structure, although the affected landowner has to act if they want it removed rather than tolerated.
Can an encroachment stop a property sale?
It can, because title insurers may exclude it from cover and lenders often refuse to complete until the boundary position is documented and agreed.
Does an encroachment reduce a property's value?
It generally reduces the value of the land being intruded upon and creates a contingent cost for the encroaching owner, so both sides carry some exposure until it is settled.
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