Valid Liens



What is a Valid Lien?
To create a valid lien it is essential that:

  1. The party that is claiming a lien should have actual possession with the assent of the party against who the claim is made.

  2. The party to whom or by whom the asset is acquired should have the absolute property or ownership of that asset, or at least a right to vest it.

  3. Where the lien arises because of an agreement (either express or implied) and it is not limited or inconsistent with the terms or intent of the contract.


Debts or Claims to which Liens Attach
The formal explanation involving debts or claims to which liens attach are:

  1. In general, liens will attach to liquidated demands but not on those which sound only in damages; though by express contract they may attach in such a case where the goods are to be held as an indemnity against a future contingent claim or damages.

  2. The claim for which the lien is asserted has to be due to the party who is claiming it in their own right and not claiming it as an agent of another party. It has to be a debt or demand which is due to the actual person that is bringing the claim and not from another party that they are acting for, although the goods may be claimed through him or her.


How can a Lien be Lost?
A lien can be lost in 2 ways.

  1. It can be lost by an act or agreement between the parties.

  2. It can be lost by a voluntary parting with possession of the goods in dispute. (There are some exceptions to this rule).


The Effect of Liens
The right of the holder of the lien is confined to the right of the retainer. In some cases a creditor will have the right to sell except where the lien doesn’t confer the power to sell. Liens can be legal which means it can be enforced in a court of law or they can be equitable which means they are only valid in a court of equity. The lien which the seller of real estate has on the real estate sold for the money that has been held as due is an example of an equitable lien.


the USA Regulations on Liens
A lien is a right for retailers and service providers to hold goods until payment is received. It can be applied to goods not collected after they have been brought into a service provider for repair or servicing. If, 2 months after the payment should have been received, the goods have still not been collected and paid for, the holder of the goods has the right to sell the goods at auction. This right is given by the Wages Protection and Contractors' Liens Act Repeal Act 1987. The Act sets out the steps that must be followed when deciding to sell the goods.