Lien

Lien

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In law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

, a lien (ˈliːən; ˈliːn) is a form of security interest
Security interest
A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt. It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets...

 granted over an item of property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...

 to secure the payment of a debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

 or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienor and the person who has the benefit of the lien is referred to as the lienee.

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

In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, the term lien generally refers to a wide range of encumbrance
Encumbrance
Encumbrance is legal technical terminology for anything that affects or limits the title of a property, such as mortgages, leases, easements, liens, or restrictions. Also, those considered as potentially making the title defeasible are encumbrances...

s and would include other forms of mortgage or charge. In the USA, a lien characteristically refers to non-possessory 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 USA, 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. 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 USA 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
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...

 and the debtor:
  • mortgage
  • chattel mortgage
    Chattel mortgage
    Chattel mortgage, sometimes abbreviated CM, is the legal term for a type of loan contract used in some states with legal systems derived from English law....



Nonconsensual liens typically arise by statute
Statute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...

 or by the operation
Operation of law
The phrase "by operation of law" is a legal term that indicates that a right or liability has been created for a party, irrespective of the intent of that party, because it is dictated by existing legal principles. For example, if a person dies without a will, his heirs are determined by operation...

 of the common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...

. Those laws give a creditor the right to impose a lien on an item of real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...

 or a chattel by the existence of the relationship of creditor and debtor. Those liens include
  • tax lien
    Tax lien
    A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes....

    s, imposed to secure payment of a tax
    Tax
    To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

    ;
  • "weed liens" and "demolition liens", assessed by the government to rectify a property from being a nuisance and public hazard;
  • attorney
    Lawyer
    A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...

    's liens, against funds and documents to secure payment of fees;
  • mechanic's liens, which secure payment for work done on property or land
    Real property
    In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...

    ;
  • judgment liens, imposed to secure payment of a judgment;
  • maritime
    Sea
    A sea generally refers to a large body of salt water, but the term is used in other contexts as well. Most commonly, it means a large expanse of saline water connected with an ocean, and is commonly used as a synonym for ocean...

     liens, imposed on ship
    Ship
    Since the end of the age of sail a ship has been any large buoyant marine vessel. Ships are generally distinguished from boats based on size and cargo or passenger capacity. Ships are used on lakes, seas, and rivers for a variety of activities, such as the transport of people or goods, fishing,...

    s by admiralty law
    Admiralty law
    Admiralty law is a distinct body of law which governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities which operate vessels on the oceans...

    .


Liens are also "perfected" or "unperfected" (see perfection
Perfection (law)
In law, perfection relates to the additional steps required to be taken in relation to a security interest in order to make it effective against third parties and/or to retain its effectiveness in the event of default by the grantor of the security interest...

). 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
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

 in bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

; 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
Legal remedy
A legal remedy is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a penalty, or makes some other court order to impose its will....

, 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:
  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
    Life estate
    A life estate is a concept used in common law and statutory law to designate the ownership of land for the duration of a person's life. In legal terms it is an estate in real property that ends at death when there is a "reversion" to the original owner...

     completes permanent and beneficial improvements to the estate begun earlier by the testator
    Testator
    A testator is a person who has written and executed a last will and testament that is in effect at the time of his/her death. It is any "person who makes a will."-Related terms:...

    ; and
  4. when land or other property is transferred subject to the payment of debts, legacies, portions or annuities to third persons.

Other common-law countries


Outside of the USA, a common-law lien may be defined in general terms as a passive right to retain a chattel (and, in certain cases, documentary intangibles and papers) conferred by law. Modern law has generally left the legal lien to cases where it has been historically established without any real effort being made to make it applicable to modern conditions. In Tappenden v Artus [1964] 2 QB 185 Diplock LJ referred to a lien as a "self help" remedy, like "other primitive remedies such as abatement of nuisance, self-defence or ejection of trespassers to land". Equitable liens are an unusual species of property right, usually considered sui generis
Sui generis
Sui generis is a Latin expression, literally meaning of its own kind/genus or unique in its characteristics. The expression is often used in analytic philosophy to indicate an idea, an entity, or a reality which cannot be included in a wider concept....

.

Common-law lien


Common-law liens are divided into special liens and general liens. A special lien, the more common kind, requires a close connection between the property and the service rendered. A special lien can only be exercised in respect of fees relating to the instant transaction; the lienee cannot use the property held as security for past debts as well. A general lien affects all of the property of the lienor in the possession of the lienee, and stands as security for all of the debts of the lienor to the lienee. A special lien can be extended to a general lien by contract, and this is commonly done in the case of carriers. A common-law lien only gives a passive right to retain; there is no power of sale which arises at common law, although some statutes have also conferred an additional power of sale, and it is possible to confer a separate power of sale by contract.

The common-law liens are closely aligned to the so-called "common callings", but are not co-extensive with them.

A common-law lien is a very limited type of security interest. Apart from the fact that it only amounts to a passive right to retain, a lien cannot be transferred; it cannot be asserted by a third party to whom possession of the goods is given to perform the same services that the original party should have performed; and if the chattel is surrendered to the lienor, the lien entitlement is lost forever (except for where the parties agree that the lien shall survive a temporary re-possession by the lienor). A lienee who sells the chattel unlawfully may be liable in conversion as well as surrendering the lien.

Equitable lien


In common-law countries, equitable liens give rise to unique and difficult issues. An equitable lien is a non-possessory security right conferred by operation of law, which is similar in effect to an equitable charge. It differs from a charge in that it is non-consensual. It is conferred only in very limited circumstances, the most common (and least ambiguous) of which is in relation to the sale of land; an unpaid vendor has an equitable lien over the land for the purchase price, notwithstanding that the purchaser has gone into occupation of the property. It is seen as a counterweight to the equitable rule which confers a beneficial interest in the land on the purchaser once contracts are exchanged for purchase.

It is a matter of conjecture how far equitable liens extend outside of the unpaid vendor's lien. Equitable liens have been held to exist in a number of cases involving choses in action, but not yet in relation to chattels. The Australian courts have been the most receptive towards equitable liens in relation to personal property (see Hewett v Court (1983) 57 ALJR 211, but a review of the cases still leaves a lack of clarity in relation to the principles upon which an equitable lien will be imposed.
  • In Re Stucley [1906] 1 Ch 67 a vendor of a reversionary interest in a trust fund, who sold the interest to the trustee, was held to have an equitable lien in the subject matter, although it was clearly personalty and not realty.
  • In Barker v Cox (1876) 4 Ch D 464 the purchaser of property which was included in a matrimonial settlement paid the price in advance to one of the trustees, and the purchaser was held to have an equitable lien in investments which the trustees subsequently acquired with the purchase price.
  • In Langen and Wing v Bell [1972] Ch 685 a director's
    Board of directors
    A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...

     service agreement required him to assign his shares in the company if he was terminated, and he was to receive a price calculated at a later date when the annual accounts were available; he was held to have an equitable lien over the transferred shares to secure the payment of the eventual purchase price.
  • In Lord Napier & Etterick v Hunter [1993] 2 WLR 42 it was held that an indemnity insurer's subrogation
    Subrogation
    Subrogation in its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim....

     rights in relation to funds improperly paid directly to the insured were subject to an equitable lien.

But overall, there is still perceived to be a lack of central nexus.

Statutory liens and contractual liens


Although arguably not liens as such, two other forms of encumbrance are sometimes referred to as liens.

Statutory liens


Certain statutes provide for a passive right to retain property against its owner as security for obligations. For example, section 88 of the Civil Aviation Act 1982 of the United Kingdom permits an airport to detain aircraft for unpaid airport charges and aviation fuel. Although this right has been treated as a lien under UK insolvency law, it has been argued that such statutory rights are not in fact liens, but rights analogous to liens, although some might say that this is a distinction without a difference.

Contractual liens


It has also been argued that an agreement by contract that one party may retain the goods of another party until paid is not a lien, as under the common law, liens could only be non-consensual. However, it appears that under insolvency law, such rights will be treated as liens even if they are not expressed to be liens.

Maritime liens



A maritime lien is a lien on a vessel, given to secure the claim of a creditor who provided maritime services to the vessel or who suffered an injury from the vessel's use. Maritime liens are sometimes referred to as tacit hypothecation. Maritime liens have little in common with other liens under the laws of most jurisdictions.

The maritime lien has been described as "one of the most striking peculiarities of Admiralty law
Admiralty law
Admiralty law is a distinct body of law which governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities which operate vessels on the oceans...

". A maritime lien constitutes a security interest upon ships of a nature otherwise unknown to the common law or equity. It arises purely by operation of law
Operation of law
The phrase "by operation of law" is a legal term that indicates that a right or liability has been created for a party, irrespective of the intent of that party, because it is dictated by existing legal principles. For example, if a person dies without a will, his heirs are determined by operation...

 and exists as a claim upon the property concerned, both secret and invisible, often given priority by statute over other forms of registered security interest. Although characteristics vary under the laws of different countries, it can be described as:
  1. a privileged claim,
  2. upon maritime property,
  3. for service to it or damage done by it,
  4. accruing from the moment that the claim attaches,
  5. travelling with the property unconditionally,
  6. enforced by an action in rem
    In rem
    In rem is Latin for "against a thing." In a lawsuit, an action in rem is directed towards a piece of property rather than against a person . The action disputes or seeks to transfer title to property. When title to real estate In rem is Latin for "against a thing." In a lawsuit, an action in rem...

    .

Nomenclature


Throughout the world, there are a large number of different types and sub-divisions of liens. Not all of the following liens exist in all legal systems that recognise the concept of a lien. The following are descriptions that are not necessarily mutually exclusive. Types of lien include
  • accountant's lien—the right of an accountant
    Accountant
    An accountant is a practitioner of accountancy or accounting , which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.The Big Four auditors are the largest...

     to retain a client's papers until the accountant's fees have been paid.
  • agent's lien
  • agister's lien—the lien of an agister
    Agistment
    Agistment originally referred specifically to the proceeds of pasturage in the king's forests. To agist is, in English law, to take cattle to graze, in exchange for payment.-Agistment:...

     over animals in the agister's care as security for fees.
  • agricultural lien (United States)—a statutory lien that protects the seller of farming equipment by giving the seller a lien on crops grown with the equipment.
  • architect's lien—the right of an architect
    Architect
    An architect is a person trained in the planning, design and oversight of the construction of buildings. To practice architecture means to offer or render services in connection with the design and construction of a building, or group of buildings and the space within the site surrounding the...

     to retain a client's papers until the architect's fees have been paid.
  • attachment lien—a lien on property seized by pre-judgment attachment.
  • attorney's lien—the right of an attorney
    Lawyer
    A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...

     to retain a client's papers until the attorney's fees have been paid (also referred to as a charging lien, solicitor's lien or a retaining lien in some jurisdictions.
  • banker's lien—the right of a bank
    Bank
    A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

     to satisfy a customer's matured debt by seizing the customer's money or property within the bank's possession.
  • blanket lien—a lien that gives the lienee the entitlement to take possession of any or all of the lienor's real property to cover a delinquent loan.
  • carrier's lien—a carrier's right to retain possession of cargo
    Cargo
    Cargo is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.-Marine:...

     until the owner of the cargo pays shipping costs.
  • choate lien (United States)—a lien in which the lienee, the property, and the monetary amount are established so that the lien is perfected
    Perfection (law)
    In law, perfection relates to the additional steps required to be taken in relation to a security interest in order to make it effective against third parties and/or to retain its effectiveness in the event of default by the grantor of the security interest...

     and nothing else needs to be done to make the lien enforceable.
  • common-law lien—a lien arising under the common law, rather than by statute
    Statute
    A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...

    , equity or agreement between the parties.
  • concurrent lien—means one of two or more liens over the same property.
  • consummate lien (United States)—a judgment lien arising after the denial of motion for a new trial.
  • conventional lien (United States)—a lien that is created by agreement between the parties, in circumstances where the law would not otherwise create a lien.
  • deferred lien (United States)—a lien that only take effect from a future date.
  • demurrage lien—a carrier's lien on goods for any unpaid demurrage
    Demurrage
    The term demurrage originated in vessel chartering and refers to the period when the charterer remains in possession of the vessel after the period normally allowed to load and unload cargo . By extension demurrage refers to the charges that the charterer pays to the shipowner for its extra use of...

     charges.
  • dragnet lien (United States)—a lien that is enlarged to cover any additional credit extended to the debtor to the same creditor.
  • environmental lien—A charge, security, or encumbrance on a property's title to secure payment of cost or debt arising from response actions, cleanup, or other remediation of hazardous substances or petroleum products.
  • equitable lien—a lien that is enlarged to cover any additional credit extended to the debtor to the same creditor.
  • execution lien—a lien on property seized by levy of execution.
  • factor's lien—a lien, usually statutory, on property held on consignment by a factor
    Factoring (finance)
    Factoring is a financial transaction whereby a business job sells its accounts receivable to a third party at a discount...

    .
  • first lien—a lien that takes priority over all other encumbrances over the same property.
  • floating lien (United States)—a lien that is expanded to cover any additional property that is acquired by the lienor while the debt is outstanding (in common-law countries, see Floating charge
    Floating charge
    A floating charge is a security interest over a fund of changing assets of a company or a limited liability partnership , which 'floats' or 'hovers' until conversion into a fixed charge, at which point the charge attaches to specific assets...

    ).
  • garnishment lien—a lien on the debtor's property held by a garnishee
    Garnishment
    A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party to pay money, otherwise owed to the defendant, directly to the plaintiff...

    .
  • general lien—a possessory lien by which the lien holder may retain any of the debtor's goods in the lien holder's possession until any debt due from the debtor, whether in connection with the retained goods or otherwise, has been paid. Factors, insurance brokers, packers, stockbrokers and banker's liens are all usually general liens.
  • healthcare lien (United States)—a statutory lien asserted by an HMO, insurer, medical group or independent practice association against those liable to the, also its patient in damages, to recover money paid or claim money payable for healthcare services provided (sometimes called a healthcare lien).
  • hospital lien (United States)—a statutory lien asserted by a hospital
    Hospital
    A hospital is a health care institution providing patient treatment by specialized staff and equipment. Hospitals often, but not always, provide for inpatient care or longer-term patient stays....

     to recover the costs of emergency and other ongoing medical and other services.
  • hotelkeeper's lien—a possessory or statutory lien allowing an innkeeper to hold, as security for payment, personal property that a guest has brought into the hotel
    Hotel
    A hotel is an establishment that provides paid lodging on a short-term basis. The provision of basic accommodation, in times past, consisting only of a room with a bed, a cupboard, a small table and a washstand has largely been replaced by rooms with modern facilities, including en-suite bathrooms...

     (also referred to as an innkeeper's lien).
  • inchoate lien
    Inchoate lien
    An Inchoate lien is a lien in which the terms or procedures remain undefined or unfinished.This type of lien is easily vacated or revoked in the case where the applicable judgment no longer applies....

    —a lien that may be defeated if the relevant judgment is vacated or a motion for a new trial is granted.
  • involuntary lien—a lien arising without the lienor's consent.
  • judgment lien—a lien imposed on a judgment debtor's non-exempt property.
  • judicial lien—a lien obtained by judgment, levy, sequestration or other legal or equitable process or proceeding.
  • junior lien—a lien that is junior or subordinate to another lien on the same property.
  • landlord's lien—a lien which empowered a landlord to seize a tenant's property and sell it to satisfy overdue rent.
  • manufacturer's lien—a statutory lien that secures payment for labour or materials expended in producing goods for another.
  • maritime lien
    Maritime lien
    A maritime lien in admiralty law is a privileged claim upon maritime property, such as a ship, in respect of services rendered to, or the injuries caused by that property. In common law, a lien is the right of the creditor to retain the properties of his debtor until the debt is paid.It is a...

    —see above.
  • mechanic's lien—(also sometimes referred to as an artisan's lien, chattel lien, construction lien, labourer's lien, in various jurisdictions).
  • mortgage lien—a lien on the mortgagor's property securing the mortgage
    Mortgage loan
    A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...

    .
  • municipal lien (United States)—a lien by a municipal corporation
    Municipal corporation
    A municipal corporation is the legal term for a local governing body, including cities, counties, towns, townships, charter townships, villages, and boroughs. Municipal incorporation occurs when such municipalities become self-governing entities under the laws of the state or province in which...

     against a property owner for the owner's proportional share of a public improvement that specifically and individually benefits the owner.
  • possessory lien—a lien allowing the creditor to keep possession of the encumbered property until the debt is satisfied.
  • second lien—a lien that is next in rank after a first lien on the same property.
  • secret lien—a lien not appearing of record and unknown to the purchasers; a lien reserved by the vendor and kept hidden from third parties to secure the payment of goods after delivery.
  • Solicitor's lien—the right of a solicitor
    Solicitor
    Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...

     to recover his costs from a client. It is broader than a conventional lien.
  • special lien—a possessory lien by which the possessor of goods has the right to retain specific goods until a debt incurrent in connection with the goods has been paid (also referred to as a particular lien). The opposite of a general lien.
  • statutory lien—a lien arising solely by force of statute.
  • tax lien
    Tax lien
    A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes....

    —a lien on property and all rights to property imposed by the taxing authority for unpaid taxes.
  • vendee's lien—a buyer's lien on the purchased land as security for repayment of purchase money paid in, enforceable if the seller cannot or does not convey good title.
  • vendor's lien—a seller's lien on land as security for the purchase price (sometimes called an unpaid vendor's lien).
  • voluntary lien—a lien created with the lienor's consent.
  • warehouser's lien—a lien for storage charges for goods stored with a bailee
    Bailment
    Bailment describes a legal relationship in common law where physical possession of personal property, or chattel, is transferred from one person to another person who subsequently has possession of the property...

     (sometimes called a warehouseman's lien).
  • workers' compensation lien—a statutory lien, asserted by a healthcare provider, to recover the cost of emergency and ongoing medical work, usually asserted against any workers'-compensation benefits paid to a patient.

See also

  • Mechanic's lien
  • Security interest—lien
  • Tax lien
    Tax lien
    A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes....

  • False lien
    False lien
    A false lien is a lien that has no factual or legal basis, or is based upon false, fictitious, or fraudulent statements or representations. The filing of false liens is sometimes used as a tool of harassment in paper terrorism, often against government officials. The practice was pioneered by the...