Lien is a right exercised by one on someone else property for a debt or charge. It is the right of a person who has lawfully received property belonging to another to retain that property for so long as a debt owed by the owner of the property remains unpaid. It means – a right to keep possession of property belonging to another person until a debt owed by that person is discharged. It is a legal right to claim a security interest in a property provided by the owner of the property to the creditor. It is generally used as a guarantee for some sort of legal obligation such as loan repayment.
Liens may be recognized by common law or may be created by contractual agreement. The definition of a lien is a claim on property as security to make sure someone repays money they’ve borrowed. It could be established by a creditor or a legal judgment. It serves to guarantee an underlying obligation, such as the repayment of a loan. If the underlying obligation is not satisfied, the creditor may be able to seize the asset that is the subject of the lien. An example of a lien is a payment agreement for a car loan. The loan document includes provisions that allow the lender to keep you from selling the car until you pay what you owe.
Types of Liens
Particular Liens – These only apply to secure the debt arising from a particular transaction, rather than a series of transactions. The lien secures the property of the creditor for the sum due to be paid under the transaction. Categories of liens recognized by law include those between:
- tailors and
General Liens – These, on the other hand, secure property for all of the sums owed by the debtor. These may be important in insolvency situations, as they may take priority over the rights of other creditors who the debtor is owed money. Categories of liens recognized by law include those between:
- stockbrokers and clients
- bankers and customers
- hoteliers and guests
- factoring companies
- warehousing companies and customers.