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Legal Lien

Overview of a Legal Lien

The law application of the term lien refers to a form of security interest given by a borrower over an item of property as security of the payment of a particular debt or a performance of some kind of obligation. The property owner, the loan borrower, the person who grants the lien is known in legal terms as the lienor, and the individual who the lien is in favor of is known as the lienee.

A legal lien therefore is depicted as the right to retain physical possession of material assets as security for the stipulated underlying legal obligations. A legal lien is a kind of possessory security and the asset possession has to be transferred and maintained by the lienee. Note that the right of the security is passive in that the lienee doesn’t have the right to seize or sell the property, only the right to retain the property until the debt or obligation terms are met fully. In most cases, legal liens arise as a mater of statute and common law, but it can also be created by contract.

A legal lien can be consensual (voluntary) or non-consensual (non-voluntary) whereby a voluntary legal lien is imposed by a contract between the involved parties i.e. the creditor and the borrower. Legal liens under voluntary include chattel mortgages, security interest, car loans, mortgages, property improvements etc. Non-voluntary liens on the other hand are as a result of the operation of the common or statute law whereby the creditor gets the legal right to impose a lien on an item of a property by the mere existence of a relationship between the creditor and the debtor. Such liens include tax liens that are put in place to secure tax payment, mechanic’s liens which are imposed to secure payment for work done on land or property, maritime liens, judgment liens and attorney’s liens.

Common-law legal lien

Common law legal liens are divided into either general or special liens. A general lien is a legal lien that affects all the property owned by the lienor and which is now in possession of the lienee, and the same property that acts as collateral for all debts that the lienor has of the lienee. A special lien is the commonest of the two and entails having a close connection between the service rendered and the property in question. As such, a special legal lien can only be put into practice in revere of the fees that relate to the immediate transaction meaning that the lienee can never use the property put as collateral as security for any past debts of the lienor.

A special legal lien can be made a general lien by use of a legal contract, which is the case that normally happens with carriers. A common law legal lien doesn’t have any power of sale on the part of a lienee, only the right of retain over the stipulated time. However, some statute law confers the power of sale and through a separate legal contract; the lienee can also get power of sale.

Tags: collateral, credit, law, Legal, loan, mortgage, tax

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