A lien is a registered legal claim on personal property, most often used as security or collateral for a debt or loan. Liens are used to ensure repayment of loans or outstanding debt and are typically publicly registered.
Who Registers and Why
Lenders and sellers (also known as “secured parties”) register their interests in personal property of a debtor to ensure a legal right to collect on established collateral, should the need arise.
Buyers may register an interest in the personal property of a seller in order to protect their interests in goods being purchased that are still in the possession of the seller.
Garage keepers register non-possessory repairers liens against motor vehicles, trailers, boats, outboard motors or aircraft in order to collect on outstanding or defaulted bills.
Taxing authorities register tax liens against the personal property of a taxpayer for collection of outstanding taxes.
Agents, notaries, law firms or any legal party that has been authorized to act on behalf of a secured party may also register liens on or statements of personal property.
Importance to Buyers and Lenders
Liens are important for buyers of personal property, as well as for lenders of money. Here’s why:
Buyers: Any person who intends to purchase personal property can search the registry to ensure that the property has not been pledged as collateral by the current or previous owners and is therefore free and clear of any encumbrances.
Lenders: Anyone intending to lend money based on the security of personal property can first search the registry to ensure that the property is not currently pledged as collateral for another loan – and that the debtor is in a position to grant a security interest in the item.
There are several transactions available for liens. Each type of lien has legislation that governs the filing in the registry, with conditions that must be met before the lien can be filed. For example:
|Type of Lien||Legislation||Condition|
|Security agreement||Personal Property Security Act||Parties must enter into a security agreement contract prior to filing the lien.|
|Repairer/Garage Keeper||Repairers Lien Act||
Vehicle must have been returned to customer.Lien must be filed within 21 days of returning the vehicle to the customer and have a signed work order.
|Sale of Goods||Sale of Goods Act||Buyer is not in receipt of goods that have been paid for in full.|