What lien means
A lien is leverage attached to property.
Somebody owes you money in connection with goods or property you hold, so the law lets you keep holding it until they pay. That is the classic possessory lien, and it is why a mechanic, a printer or a warehouse can refuse to release your goods.
The term also covers non possessory claims registered against assets, such as a charge over property securing a loan. What unites them is that a third party has a right over the asset that binds whoever comes next.
How it is used
In everyday Nigerian commerce, liens turn up when a service provider holds goods against unpaid fees, when a bank takes security over assets, or when a landlord claims over property left behind.
In transactions, they matter to buyers. Buying an asset with a lien over it means buying the claim as well, which is why due diligence looks for them and why sale documents contain a warranty that the asset is free from liens and encumbrances.
Key features
- Attaches to specific property rather than to the debtor generally
- A possessory lien depends on holding the goods, and is usually lost if they are given up
- Registered charges over company assets appear on public records
- Binds later purchasers where properly created and, where required, registered
- Discharged when the underlying debt is paid
How this works in Nigeria
For companies, charges over assets are registrable at the CAC, and a search reveals them. That search is a standard part of lending and acquisition due diligence, and skipping it means buying a company whose assets may already be pledged.
For land, the equivalent is the search at the state lands registry, which shows registered mortgages and other encumbrances. In both cases the principle is the same. A registered interest is discoverable, and a buyer who did not look is not protected by ignorance.
Lien vs mortgage vs pledge
A lien is a right to retain or claim against property until a debt is paid, and a possessory lien depends on actually holding the thing.
A mortgage is security over property, typically land, created by agreement and usually registered, where the borrower keeps possession while the lender holds an interest.
A pledge involves handing possession of goods to the creditor as security, with ownership staying with the borrower. The practical difference between them is who holds what, and whether the interest is registered somewhere a buyer can find it.
Limits and risks
A possessory lien usually evaporates once possession is given up. A repairer who releases the vehicle and then tries to claim a lien over it has generally lost the right.
A lien also secures a debt, it does not create ownership. The holder cannot simply keep or sell the asset without following the process the law or the contract requires.
Worth knowing
Before buying business assets or a vehicle, ask what is owed on it and search where a search is possible. A lien follows the asset, not the person who created the debt.