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Lien

1 minute Read

A lien is a claim held by one party on another party’s asset or assets that is released upon fulfillment of one or more stated conditions. A lien is essentially the legal contract governing collateral. It is also sometimes a reflection of the duty of a party to compensate another for work or services performed.

A lien is very common in situations where assets are being purchased or pursued through the use of borrowed funds. A mortgage is an example of a lien in which the property purchased is the subject of the lien. Similarly, an auto loan is an example of such a lien. These are both particular liens, meaning that the obligation to the creditor regarding the particular asset must be satisfied in order for the lien to be cleared.

Another example of a lien is that of a trade worker claiming ownership of property that was built or worked upon. When work is performed by a laborer, he or she may be entitled to hold a lien on the property until they are compensated for their labor.

Certain liens are known as express liens — in other words, liens that are created expressly. This is the case when loan contract is signed and collateral is presented as security for the loan, as is the case with a mortgage or auto loan. A legal relation may also create a lien. This is when work is performed on property and it is the duty of the recipient to compensate the laborer.

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