Which of the following is an example of an encumbrance?

An encumbrance refers to any claim, lien, charge, or liability attached to and binding real property that may diminish its value or restrict its use. Property taxes represent an obligation imposed on property owners by the government, requiring them to pay a certain amount annually based on the assessed value of their property. This tax establishes a lien against the property, which can result in a claim on the property if left unpaid. Therefore, property taxes are a clear example of an encumbrance because they create a financial obligation associated with the ownership of the property and can affect the property’s title and its marketability.

In contrast, a warranty deed, while crucial in transferring ownership and providing guarantees about the title to the property, does not represent a charge or claim against the property itself. A right of first refusal is a contractual agreement that does not impose a financial claim on the property, but rather provides a priority to purchase under specific conditions. Similarly, a lease agreement pertains to the rights granted to a tenant to occupy the property but does not represent an encumbrance in terms of a financial liability attached to ownership, as it primarily defines rental terms and conditions. The distinction lies in the financial impacts and obligations that a property tax imposes on the property owner,