By default, AutoCAD LT defines the boundary by analyzing all the closed objects in the drawing. Analysis of all objects fully or partially visible on the screen as boundaries can be time consuming in a complex drawing. To hatch a small area of a complex drawing, you can define a set of objects in the drawing called a boundary set. When you specify an internal point within the boundary set, AutoCAD LT does not analyze objects that are not included in the boundary set. Boundary sets are also useful for applying hatches to islands differently in different sections of a drawing.
For clarity, first zoom into the area you want to hatch.
The View Selections option in the Boundary Hatch dialog box highlights the objects in the drawing that define the boundary.