Also known as: retaining lien · retainer lien · retainer liens · possessory lien
Written by attorneys · grounded in primary & secondary sources — see below
A possessory interest in goods, other than a security interest or agricultural lien, that secures payment for services or materials furnished with respect to the goods by a person in the ordinary course of the person's business, is created by statute or rule of law in favor of that person, and depends on the person's continued possession of the goods for its effectiveness.
Rosa Ruiz delivers her tractor to Ricardo Rojas, a mechanic, for engine repairs. Ricardo completes the work in the ordinary course of his business, bills Rosa, and keeps possession when she fails to pay. A bank holding a prior perfected security interest in the tractor demands immediate release, but Ricardo refuses. The possessory lien prevails, allowing Ricardo to retain the tractor until paid.
Bridge Equity sends servers to Alpha Fund for system hardening. Alpha Fund performs the upgrades in the ordinary course of its IT business and retains possession after nonpayment. Horizon Equity, holding a prior perfected security interest in the servers, demands surrender. Alpha Fund's interest meets the statutory criteria for a possessory lien and takes priority.
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 business, arise by statute or rule of law, and depend on continued possession. All three requirements must be met for the lien to receive the priority granted by the statute.
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No. The possessory lien takes priority over a security interest in the same goods unless the statute creating the lien expressly provides otherwise. Earlier perfection of the security interest does not control under this specific rule.
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Silence means the statute does not expressly provide otherwise, so the default priority rule applies and the possessory lien prevails. The lienholder may retain the goods until paid even against a prior secured party.
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No. The rule does not require consent from an earlier secured party. The priority flows from the statutory definition and possession requirement alone.
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