Lien

A lien (n/ or ən/)[Note 1] is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienee[3] and the person who has the benefit of the lien is referred to as the lienor[4] or lien holder.

The etymological root is Anglo-French lien, loyen "bond", "restraint", from Latin ligamen, from ligare "to bind".

In the United States, the term lien generally refers to a wide range of encumbrances and would include other forms of mortgage or charge. In the US, a lien characteristically refers to nonpossessory security interests (see generally: Security interest—categories).

In other common-law countries, the term lien refers to a very specific type of security interest, being a passive right to retain (but not sell) property until the debt or other obligation is discharged. In contrast to the usage of the term in the US, in other countries it refers to a purely possessory form of security interest; indeed, when possession of the property is lost, the lien is released.[5] However, common-law countries also recognize a slightly anomalous form of security interest called an "equitable lien" which arises in certain rare instances.

Despite their differences in terminology and application, there are a number of similarities between liens in the US and elsewhere in the common-law world.

United States

Liens can be consensual or non-consensual (also termed voluntary or involuntary in different states). Consensual liens are imposed by a contract between the creditor and the debtor:

Nonconsensual liens typically arise by statute or by the operation of the common law. Those laws give a creditor the right to impose a lien on an item of real property or a chattel by the existence of the relationship of creditor and debtor. Those liens include

  • Tax liens, imposed to secure payment of a tax;
  • "Weed liens" and "Demolition liens", assessed by the government to rectify a property from being a nuisance and public hazard;
  • Homeowner Association (HOA) liens for unpaid assessments, fines, late charges, interest, costs, and attorney fees;
  • Attorney's liens, against funds and documents to secure payment of fees;
  • Mechanic's liens, which secure payment for work done on property or land;
  • Judgment liens, imposed to secure payment of a judgment; and
  • Maritime liens, imposed on ships by admiralty law.

Liens are also "perfected" or "unperfected" (see perfection). Perfected liens are those liens for which a creditor has established a priority right in the encumbered property with respect to third party creditors. Perfection is generally accomplished by taking steps required by law to give third party creditors notice of the lien. The fact that an item of property is in the hands of the creditor usually constitutes perfection. Where the property remains in the hands of the debtor, some further step must be taken, like recording a notice of the security interest with the appropriate office.

Perfecting a lien is an important part of the task of protecting the secured creditor's interest in the property. A perfected lien is valid against bona fide purchasers of property, and even against a trustee in bankruptcy; an unperfected lien may not be.

Equitable lien (U.S.)

In the United States, references to an "equitable lien" is a right, enforceable only in equity, to have a demand satisfied out of a particular fund or specific property without having possession of the fund or property. An equitable lien is actually a legal remedy, rather than a security interest created in contemplation of or in support of a transaction. In U.S. law, such liens characteristically arise in four circumstances:[6]

  1. when an occupant of land, believing in good faith to be the owner of the land, makes improvements, repairs or other expenditure that permanently increases the land's value;
  2. when one of two or more joint owners makes expenditures of the kind described above;
  3. when a tenant for life completes permanent and beneficial improvements to the estate begun earlier by the testator; and
  4. when land or other property is transferred subject to the payment of debts, legacies, portions or annuities to third persons.

Mover's lien

Movers are typically entitled to a mover's lien under UCC § 7-307/308, to withhold a customer's goods to secure payment. This is a possessory lien, and is the non-consensual type of lien (because it exists automatically under a statute instead of being affirmatively agreed upon). However, the concept of a mover's lien is often abused in a moving scam known as a hostage load, whereby the moving company will fraudulently extort money not owed by the customer by refusing to deliver the goods unless the customer pays money inflated beyond the contractual estimate. Because the customer has an interest in obtaining their own goods, they are under duress to pay the ransom. Hostage loads in at least the interstate context are illegal under 49 U.S.C. 13905. The FMCSA regulates the moving industry and sometimes takes enforcement action by fining and/or delicensure of offending moving companies. Moving companies that deliberately engage in hostage-loading may also be considered to be engaging in racketeering in violation of the Racketeer Influenced and Corrupt Organizations Act.

Disputes between legitimate lienholding of chattels vs. hostage-loading can sometimes be averted by the customer including an advanced (before-the-fact) consensual waiver of the mover's right to a lien in the written contract, obligating the moving company to deliver the goods with reasonable dispatch regardless of disputes over payment, and failure to do so would constitute conversion or trespass to chattels.[7][8][9]

Other Languages
العربية: حق الحجز
فارسی: حق حبس
ગુજરાતી: પૂર્વાધિકાર
עברית: עיכבון
Nederlands: Retentierecht
日本語: 先取特権
Simple English: Lien
中文: 留置權