A monetary encumbrance on property is called what?

• A. Covenant
• B. Lien
• C. Tax
• D. Mortgage

Answer: (B)

A lien is a monetary encumbrance on property. It’s a legal claim against the property that secures the payment of a debt or obligation, and it sits on the title until the debt is paid or the lien is released. This can arise in several ways, such as a mortgage being placed on the home, unpaid property taxes creating a tax lien, or a mechanic’s lien for work done on the property. The key idea is that a lien represents a security interest in the property, affecting its transfer until the obligation is resolved. A covenant is a promise or restriction tied to the deed and isn’t a debt security. A tax is a government charge and, while it can generate a lien, the encumbrance itself is the lien, not the tax itself. A mortgage is a loan secured by the property, which creates a lien, but the broader term for the encumbrance is lien.