An interest in and right to real property that limits the legal owner's freehold interest is known as what

Answer: Encumbrance

Explanation:

An encumbrance is the term which refers to the right to the real properties and the legal liability which basically limits the owner interest and also it may diminished the value of the property. An encumbrance is basically classified into the two main categories such as:

Financial Non-financial

The main purpose of the encumbrance is that it basically avoiding the overspending in terms of budget and it is used as the planning tool for predicting the overall cash outflow in the accounting.

Therefore, Encumbrance is the correct answer.