Which of the following is considered an example of an encumbrance?

An encumbrance is a legal claim or liability attached to a property that can affect its transferability or reduce its value. A mortgage on a property is a prime example of an encumbrance because it represents a lien placed on the property by a lender. The mortgage signifies that the property is being used as collateral for a loan, ensuring that the lender has a legal right to take possession of the property if the borrower defaults on the loan. This lien must be satisfied before the property can be sold, impacting the owner’s ability to transfer clear title to a buyer.

In contrast, the ability to transfer ownership of the property and the right to use the property freely do not constitute encumbrances since they represent the owner's rights rather than claims against the property. The negotiation of terms in a lease relates to the rights of use granted to a tenant but does not inherently impose a claim or burden on the property akin to a mortgage. Therefore, among the options, a mortgage clearly exemplifies an encumbrance.