lien

A lien 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. Liens may come in to force at common law or by contractual agreement.

Common law liens are a possessory security and only grant the right to retain the goods which are subject to the lien. As such they do not grant the holder the power to sell the goods to discharge or reduce the debt owed, subject to any contractual rights or order of a Court. Dealings with property contrary to the terms of the lien are likely to discharge it and render the lienholder liable to the owner of the property in conversion.

Particular and General Liens defined

Particular liens 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. General liens on the other hand secure property for all of the sums owed by the creditor. General liens may be important in insolvency situations, as they take priority over the rights of other creditors who the debtor is owed money.

The characterisation of the type of lien is determined by reference to the terms of the contract, and where the contract does not refer to such matters, by recourse to categories of case established by case law.

Liens are only available by way of express agreement between the parties or if the case in question falls into the class previously recognised by the courts.

General and particular liens require the person asserting it to receive possession of relevant property lawfully, and continue possession lawfully. Equitable liens do not require possession the relevant property and have some qualities of charges, in that, inter alia, they give rise to a right to sell the property with the permission of the court. Some forms of equitable liens arise by way of statute. The Law of Property Act applies to these liens and the interest should be registered. Liens do not otherwise entitle the lienholder to sell the property unless a statutory exception applies to permit sale.

Categories of Liens

Common categories of general liens include those which may be asserted by stockbrokers, bankers, hoteliers, factoring companies and warehousemen. However, the transaction in question must be one which is consistent with the circumstances required for a lien to arise in accordance with the established cases. Transport companies are entitled to assert particular liens over the goods which are the subject of a contract of carriage, and are entitled to assert the lien until such time as relevant charges are paid. Particular liens may also arise for the benefit of architects, accountants, printers, tailors and dry cleaners, each over specified property which is the product of the professional services provided.

A lien may be terminated in a number of different circumstances which include where:

1. The creditor has discharged its obligations in respect to the lien. Usually, this will be the payment or tender of payment for the debt, however contractual liens may require further steps;
2. The parties agree to discharge the lien or waives its rights;
3. The lienholder does some act to terminate the lien, such as transferring possession of the property to a third party.