A lien is a legal right against a property or asset which is used as collateral to secure payment for a debt or obligation. It is a legitimate way for a creditor to get a security interest in a piece of property the owner has given them. It is typically used as a guarantee for some kind of legal obligation, like loan.
In other words, a lien guarantees that if a borrower doesn't fulfil his legal and/or financial duties, a creditor will have the legal right to the property. The party receiving the lien is known as the lienor or lien holder, while the grantor—the owner of the property—is referred to as the lienee. A legal claim or legal right that is made against the assets that are used as collateral to pay off a debt is referred to as a lien.
Example of Lien: Say you take a loan from a bank and give your property papers as collateral. In case you fail to pay back the loan, the bankers will have the right to take possession of your property.
A lien may be created by a court order or a creditor. The lien's main function is to ensure the fulfilment of an underlying obligation, such as loan repayment. The lender or creditor has the legal power to seize the asset that is the subject of the lien if the borrower fails to fulfil this fundamental requirement. Liens of many kinds are employed to protect assets.
Bank, real estate, and tax liens are the three basic categories of liens. Property contracts must be honoured when it comes to property. The lender has the legal authority to sell the property as well as confiscate it if the contract is not honoured.
Different types of liens may exist based on who created them. A lien may be created by a tax authority, a creditor, or a court order.
How do Liens operate?
A legal claim or legal right that is made against the assets that are used as collateral to pay off a debt is referred to as a lien. A lien may be created by a court order or a creditor. The lien's main function is to ensure the fulfilment of an underlying obligation, such as loan repayment. The lender or creditor has the legal power to seize the asset that is the subject of the lien if the borrower fails to fulfil this fundamental requirement. Liens of many kinds are employed to protect assets.
Bank, real estate, and tax liens are the three basic categories of liens. Property contracts must be honoured when it comes to property. The lender has the legal authority to sell the property as well as confiscate it if the contract is not honoured. Different types of liens may exist based on who created them. A lien may be created by a tax authority, a creditor, or a court order.
Lien Types
1. Consensual
Contractual commitments between the parties involved give rise to consensual liens. The most typical instances are loans taken out to buy personal or real estate (chattel). Mortgages or auto loans are two examples.
2. Non-consensual
Non-consensual liens can be created by statutes or the common law. The most known illustration is a tax lien, which is a legal claim made against a taxpayer's property. A taxpayer's real or personal property may be seized by the tax authority for the amount of the lien if they fail to pay the taxes they are required to