Lien

A lien is a legal claim or right against assets (property or goods) that is used as collateral to satisfy a debt or obligation. It grants the lienholder (creditor) the right to seize and sell the asset if the debtor fails to meet their financial responsibility. Liens can arise from various situations, including unpaid taxes, mortgages, mechanic's work, or court judgments. The specific terms of a lien, like its priority and duration, are governed by law and the agreement creating the lien.

Lien meaning with examples

• The homeowner defaulted on their mortgage payments. The bank, holding a lien on the property, initiated foreclosure proceedings to recover their loan amount. This allowed them to seize and sell the house to recoup the debt. The lien provided the bank with a secure claim.
• After a car accident, the mechanic repaired the vehicle. Since the owner did not pay the repair bill, the mechanic put a lien on the car. This gave them the legal right to hold the car until the owner settled the debt. It ensured their payment.
• The government placed a tax lien on the business's assets due to unpaid payroll taxes. This action allowed the IRS to seize and sell the business's property. The business would have had to address and satisfy the tax debt to regain control.
• A contractor, who built a garage on the property, was never paid, so they filed a mechanic's lien against the homeowner. The lien secured their right to payment, potentially through a sale of the property. This ensured they could recoup their labour cost.