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Business Basics: Lien

February 26th, 2014

 

 

A lien is a creditor’s conditional right of ownership, or security interest, against a debtor’s property that disallows its sale or transfer without paying off the creditor. In a contractual arrangement, a lien is the right of a contracting party to take possession of a specific asset of the other contracting party, in case the contract is not performed according to its terms.

 

An example of a lien is a mortgage agreement on a mortgaged property. If you get a loan to buy a house, and do not make your payments, the bank that you got the loan from, or mortgagee, has a lien on your house, and can take the house from you based on your failure to perform your end of the deal.

 

Liens are also granted by courts of law to satisfy a judgment against a losing defendant. All liens are for a limited period, apply only to the property that is part of a contract and must be properly registered to be valid and enforceable.

 

– Information compiled by Anthony Ahlegian