California Real Estate Practice Exam

In the real estate market, which type of agreement is considered an encumbrance?

1. Lease agreement

2. Ownership agreement

3. Partnership agreement

4. Selling agreement

The correct answer is: Lease agreement

A lease agreement is considered an encumbrance because it represents a claim or interest against a property that affects the owner's rights to fully enjoy and use the property. When a lease is in place, the lessee has the right to use the property for a specified period, which can limit the property owner's ability to sell or modify the property without considering the lease terms. In contrast, ownership agreements, such as deeds, pertain to the transfer of ownership of property rather than claims against it. Partnership agreements involve business entities and do not directly impose constraints on property use. Selling agreements may detail the terms of a property sale but do not in themselves create an ongoing claim or interest in the property like a lease does. Thus, among the available options, the lease agreement uniquely fits the definition of an encumbrance.