Non-Possessory Lien – Definition

Cite this article as:"Non-Possessory Lien – Definition," in The Business Professor, updated December 14, 2018, last accessed October 21, 2020,


Non-Possessory Liens Definition

Liens can be of two types: possessory and non-possessory. In non-possessory lien, the collateral is not physically possessed by the lending institution but its right on the collateral is recognized and protected by the law. The lender is allowed to repossess the asset upon payment default.

For example, when banks or other financial institutions issue a loan that is secured by the real estate, the issuer does not physically possess the asset but its claim on the asset is established. The home is not in possession of the lending institution, but the institution has a lien on it. It is a legal right of ownership contingent to the fact that the debtor fails to repay his or her debt. If the debtor fails to repay the amount according to the stipulation, the lending institution can recover the debt amount by selling the property used as collateral.

A Little More on Possessory and Non-Possessory Liens

In possessory lien, the creditor physically holds the possession of the collateral. Pawn shops keep the collateral in their possession to give out loans to their customers. They physically hold the asset with themselves and if the customer fails to repay the loan, the pawn shop owner is allowed to sell the collateral to recover the amount.

Non-possessory liens can be taken when a third-party has no other legal means of securing payment of a debt. For example, housing association may want to obtain a non-possessory lien against a home-owner to enforce payment of the assessment or other costs that the unit owner may be obligated to pay.

References for Possessory and NonPossessory Liens

Academic Research on Non-possessory Liens

  • 路聽聽聽聽聽聽 Correlation of Priority and聽Lien聽Rights in the Collection of Federal Taxes, Sarner, L. (1947). University of Pennsylvania Law Review, 739-762. This research examines the correlation between priority and lien rights in the collection of federal taxes.
  • 路聽聽聽聽聽聽 State Action and Statutory聽Liens聽in Arkansas-A Reply to Professor Nickles, Maltz, E. M. (1979). UALR LJ,聽2, 357.
  • 路聽聽聽聽聽聽 Liens聽Created by Operation of Law: A Look at Section 9-310 of the Uniform Commercial Code, Miller Jr, W. W. (1971). Com. LJ,聽76, 221. This Article examines that flawlessness of a security enthusiasm for merchandise secured by a testament of title happens upon receipt by suitable State authorities of an appropriately offered application for an endorsement of title on which the security intrigue is to be shown, without a connection back to a prior time. States whose declaration of-title resolutions accommodate flawlessness at an alternate time or contain a connection back arrangement ought to correct the rules in like manner.
  • 路聽聽聽聽聽聽 Collection of Attorney Fees by Assertion of聽Liens聽in Indiana, O’Hara, T. J., & Jones, C. T. (2007). Res Gestae,聽51, 25.
  • 路聽聽聽聽聽聽 Federal Tax聽Liens聽in Bankruptcy, Loiseaux, P. R. (1961). Vand. L. Rev.,聽15, 137.
  • 路聽聽聽聽聽聽 Dominion and the Factor’s聽Lien: Does Section 45 of the New York Personal Property Law Abrogate the” Dominion Rule”?, Zinman, R. M. (1961). Fordham L. Rev.,聽30, 59.
  • 路聽聽聽聽聽聽 Constitutional聽Lien聽on Chattels in Texas, Woodward, M. K. (1949).聽Tex. L. Rev.,聽28, 305. This segment of the paper will concentrate on the documenting of technician’s liens on business development ventures (non-private) situated on private property.
  • 路聽聽聽聽聽聽 The聽Lien聽Avoidance Section of the Bankruptcy Code: Can It Be Avoided by State Exemption Statutes, Parkinson, W. S. (1984).聽Ohio NRL Rev.,聽11, 319.
  • 路聽聽聽聽聽聽 Federal Tax聽Liens-A Study in Confusion and Confiscation, Wolson, B. B. (1959). Marquette Law Review,聽43, 180. The Internal Revenue Service routinely records government charge liens against citizens who have unpaid duty commitments. A bureaucratic expense lien is a record documented with a district government (more often than not where the citizen lives or leads business) telling the overall population that a citizen has an unpaid administrative assessment obligation. Liens append to the citizen’s property (both genuine property and individual property). 聽On the off chance that property is sold while a lien is as a result, the IRS will be paid out of the business continues before the citizen is paid. When a lien is documented, it turns into a matter of open record. Liens record everything owed to the IRS at the time the lien is documented. This data is routinely grabbed by the different credit announcing authorities, thus government charge liens will in the long run appear on your credit report.
  • 路聽聽聽聽聽聽 Some European Decisions on聽Non-Possessory聽Security Rights in Private International Law, Schilling, T. J. (1985). Some European Decisions on Non-Possessory Security Rights in Private International Law.聽International & Comparative Law Quarterly,聽34(1), 87-114. This is a pragmatic guide for individuals in the structure exchanges on how document a Mechanic’s and Materialmen’s lien, (called a M and M Lien or Mechanic’s lien) as an approach to verify installment for their work.
  • 路聽聽聽聽聽聽 Reforming聽NonPossessory聽Secured Transactions Laws: A New Strategy?, Castellano, G. G. (2015).聽The Modern Law Review,聽78(4), 611-640. This article moves the concentration from locally characterized classes to the operational standards that permit verified exchanges to play out their financial capacity of overseeing credit hazard. This move prompts a reevaluation of the principles overseeing exposure and an examination of the strategy issues supporting the development of attention. The article contends that worldwide exposure benchmarks, in light of a vault framework, could offer another methodology for transforming verified exchanges laws. The as of late received UNCITRAL’s Registry Guide is broke down and considered as a conceivable apparatus for transforming national verified exchanges laws.

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