Non-Possessory Lien

A non-possessory lien is a legal claim intended to secure payment of a debtor's obligation without physical possession of the asset in question. For example, a creditor can place a non-possessory lien against a debtor's real estate holding in order to recoup a debt or loan amount once the property is sold. A possessory lien is different in that a creditor has the right to remain in possession of an asset under the lien until the debtor has satisfied his or her debt. For example, pawn shops retain possession of an item that a customer uses as collateral for a short-term loan. The pawn store owner, therefore, retains a possessory lien; if the customer does not repay the loan according to the terms and conditions she agreed to, the store owner can take ownership of the item offered as collateral.

A non-possessory lien can be obtained in cases where a third party has no other legal means of securing payment of a debt. For example, a condominium association might make a legal filing to obtain a non-possessory lien against a condominium owner to enforce payment of assessments or other costs that unit owners may be obligated to pay.