Auctioneer Practice Exam

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What does the term 'encumbrance' refer to in property terms?

A complete ownership of a property
A legal right that limits the use of a property
A mortgage agreement
A rental agreement

The correct answer is: A legal right that limits the use of a property

The term 'encumbrance' in property terms refers to a legal right that limits the use of a property. Encumbrances can take various forms, such as easements, liens, or restrictions on the property's use, which can affect how the owner can utilize the property. For example, an easement allows someone else to access a portion of the property, while a lien may represent a claim against the property for unpaid debts. Complete ownership of a property does not involve any limitations on the property itself, which makes that option not applicable to the definition of encumbrance. A mortgage agreement, while a type of encumbrance, is more specific and refers to the borrowing of money secured against the property. Similarly, a rental agreement pertains to the leasing of the property rather than the restrictions or claims affecting ownership rights. Therefore, defining encumbrance as a legal right that limits the use of a property captures its essence accurately.