Also known as: holding liens · possessory lien
Written by attorneys · grounded in primary & secondary sources — see below
A possessory interest in goods that secures payment of an obligation by allowing the holder to retain the goods until the debt is satisfied. The interest arises by operation of law in favor of a person furnishing services or materials in the ordinary course of business. Its effectiveness depends on continued possession, and the holder lacks authority to sell the goods.
Heritage Trust held a perfected security interest in drilling motors owned by Midnight Solar. Midnight Solar delivered the motors to Royal Utilities for retooling services performed in the ordinary course of business. Royal Utilities completed the work, retained continuous possession, and refused to release the motors until payment. The holding lien arising from the services takes priority over Heritage Trust's security interest.
View Livestock held a perfected security interest in Drew's tractor. Drew delivered the tractor to Glen for engine repairs in the ordinary course of Glen's business. Glen completed the repairs, billed Drew, and retained possession under a state statute creating a lien whose effectiveness depended on continued possession. The statute contained no express subordination language, so Glen's interest prevails.
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The interest must secure payment for services or materials furnished with respect to goods in the ordinary course of the person's business. It must be created by statute or rule of law. Its effectiveness must depend on the person's possession of the goods.
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No. The priority rule for possessory liens applies regardless of when the security interest was perfected or created. The statute grants priority without regard to the date of perfection or the secured party's consent.
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The possessory lien loses priority. The default rule of priority applies only when the creating statute does not expressly provide otherwise.
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