What is a lien?

A lien is defined as an encumbrance or claim that secures a debt against an asset or property. This legal right is typically placed on property to ensure that a debt or obligation is satisfied before the property can be sold or transferred to another party. For example, if a homeowner takes out a mortgage, the lender will place a lien on the property to secure their financial interest. If the homeowner fails to make payments, the lender has the right to pursue the property through foreclosure to recover the owed amount.

Understanding a lien is crucial in the context of title insurance because it affects ownership and transfers of property. Any existing liens must be addressed, as they could create legal complications during a real estate transaction.