Also known as: possessory liens
Written by attorneys · grounded in primary & secondary sources — see below
A statutory or common-law interest in goods, other than a security interest or agricultural lien, that secures payment for services or materials furnished with respect to the goods in the ordinary course of the lienholder's business and that remains effective only while the lienholder retains possession.
Paige Porter delivers her tractor to Precision Tools for engine repairs. Precision Tools completes the work in the ordinary course of its business but Paige fails to pay the bill. Precision Tools retains possession of the tractor and asserts a possessory lien under state law. A bank holding a prior perfected security interest in the tractor demands immediate surrender, yet the state statute creating the lien contains no express subordination language.
Pierce Patterson, a debtor in bankruptcy, had delivered equipment to a repair facility that retained possession after nonpayment and asserted a possessory lien. A secured creditor obtained a writ of execution and seized the equipment. The bankruptcy court considered whether the lien survived the automatic stay and remained effective because the repairer had never relinquished possession.
Select any source to read its text and confirm it supports the definition.
The interest must secure payment for services or materials furnished with respect to goods in the ordinary course of the lienholder's business. It must be created by statute or rule of law. Its effectiveness must depend on the lienholder's continued possession of the goods. The interest also must be something other than a security interest or agricultural lien.
Supporting sources
A possessory lien on goods has priority over a security interest in the goods unless the statute creating the lien expressly provides otherwise. The timing of the security interest's perfection is irrelevant under this rule. The creating statute's silence on priority means the default priority for the possessory lien applies.
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The possessory lien loses its special priority and the normal Article 9 priority rules govern. The secured party with the earlier perfected interest would prevail. The statute must contain express language addressing subordination to trigger this result.
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No. The priority rule contains no knowledge or notice requirement. A repairer may assert the lien even with awareness of a prior security interest, provided the other statutory elements are met and the creating statute is silent on subordination.
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