What is a lien?

A lien is a legal claim against a property that establishes the right of a creditor to take possession of that property if a debt is not paid. When a lien is placed on a property, it signifies that the property serves as collateral to the debt owed. This often occurs with mortgages and trust deeds, where the lender has a claim on the property until the borrower meets the obligations of the loan. In this context, if the borrower defaults, the lender can foreclose on the property to satisfy the unpaid debt, highlighting the critical role a lien plays in real estate transactions and financing.

The other choices reflect different concepts unrelated to the foundational idea of a lien. Home insurance is designed to protect homeowners from damages, a financial investment strategy refers to methods of investing for profit, and a lease agreement outlines the terms between a landlord and tenant regarding rental property. None of these concepts involve the legal claims that liens exemplify in real estate.