Priority of Parties Holding Statutory and Common Law Liens - Explained
Liens as a form of Security Interest
Written by Jason Gordon
Updated at April 6th, 2023
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What is the priority of parties secured by common law and statutory liens?
Possessory Liens - A possessory lien is a common law or statutory interest in an asset that:
- secures a payment for services or material furnished in the ordinary course of business;
- is create pursuant to statute or common law; and
- the asset is under the control of the lien holder. 9-333(a)
A possessory lien, as the name implies, gives priority over other secured parties in situations where an individual has physical possession of the collateral. 9-333(b)
Example: Common types of possessory lien include: repair and storage, boarding of animals, and labor performed or material supplied in course of performance.
Non-Possessory Lien - A non-possessory lien generally arises through judicial or administrative order.
Example: A common form of non-possessory lien is a judgment that is attached to a debtors property.
A possessory lien has priority over an Article 9 security interest, unless the common law or statutory authority for creating the lien indicates otherwise. A non-possessory lien, on the other hand, does not have priority over a security interest that is perfected prior to the establishment of the lien. It does, however, have priority over an unperfected security interest.
Next Article: Priority of a Security Party vs Buyer of Collateral
Back to: SECURED TRANSACTIONS
Discussion Question
Why do you think the law allows a possessory lien to claim priority over a perfected security interest? Should a non-possessory lien be given priority over a perfected security interest? Why or why not? Should a non-possessory lien be given priority over an unperfected security interest? Why or why not? Can you identify a common objective among these priority rules?
Practice Question
Nate holds a perfected security interest on Mandy's lawn mower. She takes the mower to Olivia's shop for repairs. While the mower is being repaired, she is held liable to Patrick in court. The court issues a judgment in favor of Patrick that he seeks to execute by attaching it to Mandy's mower. Whose security interest likely has priority in this situation?
Related Topics
- Secured Transactions Law (Intro)
- What is a Security Interest?
- Collateral
- Pledge as Collateral
- Collateralize
- Cross Collateralization
- After-Acquired Collateral
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Unsecured Loan Definition
- Unencumbered Asset
- What is a Secured Creditor?
- Unsecured Creditor
- What are the benefits of security interests for creditors?
- Limited Recourse Debt
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Uniform Commercial Code - Article 9
- What are the common types of security interest in real property (land)?
- What is a mortgage?
- How does a security interest protect the mortgage holder?
- Lis Pendens
- Deficiency Judgment
- What is a Deed of Trust or Security Deed?
- What is a Land Sale Contract?
- What is a security interest in personal property?
- How does one establish a security interest in personal property?
- What is Perfection of a security interest?
- What are the methods of perfecting a security interest in personal property?
- UCC-1 Statement
- How does one establish a security interest in real property (land)?
- Register of Deeds
- What is Automatic Perfection of a security interest?
- What is a Purchase Money Security Interest (PMSI) in consumer goods?
- What is a Purchase Money Grace Period for a PMSI in non-consumer goods?
- How does one continue perfection of a PMSI in non-consumer goods?
- What is Temporary Automatic Perfection in Proceeds from the sale of goods?
- How is a security interest created in Assignment of Accounts Receivable and Contract Rights?
- How does one perfect a security interest by Possession of the collateral?
- How does on perfect a security interest by Control of collateral?
- How does one perfect a security interest by Filing a Financing Statement?
- What authorization is required to file a financing statement?
- Where is the appropriate office to file a financing statement?
- Defeasance
- Continuation Statement
- What is Priority of a security interest?
- What role does perfection play in establishing the Priority of a secured party?
- What are the common conflicts arising as to priority of a security interest?
- What is the priority of parties secured by common law and statutory liens?
- Lien - Definition
- Blanket Lien Definition
- Unperfected Lien
- Possessory Lien
- Non-Possessory Lien
- Tax Lien
- Mechanics Lien Definition
- Construction Lien
- Cloud on Title
- What is the priority of a buyer of collateral that is subject to a security interest?
- What is required to be a buyer in the ordinary course of business?
- How does 9-320(b) protect consumers who purchase goods from other consumers?
- What is the Shelter Principle?
- What are the general Priority Rules for Conflicting security interests?
- Subordination Agreement
- Who has Priority in Proceeds from the sale of collateral?
- What is a secured party's priority in future advances to a debtor?
- What is the priority of a PMSI in goods (other than inventory and livestock)?
- What is the priority of a PMSI in inventory?
- What is the priority of conflicting PMSIs?
- What is the priority of security interests in fixtures?
- What is the scope of fixture priority rules?