What constitutes a lien in property terms?

A lien is defined as a legal claim or right against a property, typically used as a means to secure a debt. This means that if the debt is not paid, the lienholder has the right to take legal action to satisfy the debt, often through the sale of the property. This process ensures that creditors have a recourse to protect their interests when money is owed. Liens can arise from various situations such as mortgages, tax debts, or unpaid contractor bills, making them an essential aspect of property finance and security interests.

The other choices do not accurately describe a lien. A formal agreement between two property owners pertains to contracts or joint ownership, but it doesn’t involve securing a debt. A document stating ownership of property relates to title deeds, which confirm ownership rather than a claim for debt. An insurance policy covering property damage is related to risk management and does not involve a financial claim against the property itself. Thus, the option identifying a lien as a legal claim on property for the purpose of securing a debt is clearly the most accurate definition.