What Is a Perfected Lien?

The lien means that the creditor possesses the property of the debtor by lawful means, liens the property before the resulting creditor's rights are not paid off, and sells the lien property according to law when the debt is not paid off within a certain period of time. right. The effectiveness of the lien is mainly reflected in the lien holder's right of possession and the right of priority. The lien holder's right of possession must be subject to certain restrictions, that is, no lien can be used except for the need for storage or with the consent of the debtor, and the lien cannot be leased or mortgaged without the debtor's consent. After the creditor pays priority to the lien, if the value of the lien exceeds the payable range, the remaining part of the price shall be returned to the debtor. When the value of the lien is not sufficient to pay off, the creditor may request to make up. The lien holder can only pay preferentially the amount due under this contract from the lien property. For other debts, he cannot use the property of this contract to exercise the lien. ^[1]

lien

Lien

From the perspective of each country's legislation, liens are divided into debt liens and real liens. Debt lien is just for

Establishment of lien:
According to the legal system of property rights, the establishment of a lien requires the following:
(1) The creditor owns the movable property of the debtor. Creditors must legally own the debtor's movable property.
(2) The creditor's rights have expired. If the creditor's creditor's rights have not expired, and his obligation to deliver or return the possession of the subject matter has expired, the lien cannot be exercised. However, except where the creditor can prove that the debtor is unable to pay.
(3) Possession of movable property and the creditor's right belong to the same legal relationship. In addition, according to China's legal system of property rights, liens between enterprises are not subject to the same legal relationship.

Effect of lien:
(1) The scope of the lien guarantee includes the main creditor's rights and interest, liquidated damages, damages, lien storage costs, and the cost of realizing the lien.
(2) Where the lien property is separable, the value of the lien property shall be equal to the amount of the debt.
(3) If the debtor fails to perform his debts within the time limit, the lien holder may negotiate with the debtor to discount the lien property, or may receive priority payment for the proceeds from the auction or sale of the lien property.
(4) The lien holder has the right to receive the interest of the lien. The interest received shall first be used to offset the cost of collecting interest.
The lien holder is obliged to properly keep the lien property. If the lien property is damaged or lost due to improper storage, he shall be liable for compensation.
(5) The debtor and creditor shall agree in the contract that after the creditor retains the property, the debtor shall perform the debt within a period of not less than two months. If the creditor and the debtor do not agree in the contract, after the creditor retains the debtor's property, it shall determine a period of more than two months and notify the debtor to perform the debt within that period.
If a mortgage or pledge right has been established on the same movable property, and the movable property has been lien, the lien holder shall be compensated first; when the legally registered mortgage and the pledge right of the same property co-exist, the mortgagee shall be given priority over the pledgee; When the right and the unregistered mortgage right coexist, the pledgee has priority over the mortgagee. ^[2]

(1) Storage of indwellings.

Article 86 of the Guarantee Law stipulates: "The lien holder has the obligation to properly keep the lien. If the lien is lost or damaged due to improper storage, the lien holder shall bear civil liability." The lien holder shall be a good manager Be careful, keep the deposit. If the lien holder fails to pay attention to the good manager, it is considered to be poor storage. Therefore, if the lien is damaged or lost, it shall bear civil liability. Whether the lien holder has paid the necessary attention during the possession of the lien, whether the measures he has taken are appropriate, and whether he is at fault for the loss of the lien, the lien bears the burden of proof. If the lien owner needs assistance from the debtor when keeping the lien, he may ask the debtor for assistance. If the debtor does not assist at the request of the lien holder, the debtor shall not claim damages from the lien for the damage or loss of the lien caused thereby.

(2) Do not use or use the leftover without authorization.

The lien holder does not have the right to use the lien in principle. On the contrary, the lien holder has the obligation not to use or use the lien without authorization. Except for the purpose of storage, if the lien holder does not use the lien by itself without the debtor's consent, it must not rent or provide a guarantee.

(3) Return the deposit.

When the debt secured by the lien is extinguished, the lien holder is obliged to return the lien to the debtor. Although the obligee's right has not been eliminated, the obligor also has the obligation to return the lien when the debtor provides a separate guarantee to eliminate the lien. A lien person who violates the obligation to return the lien constitutes illegal possession and shall bear civil liability to the debtor or owner. ^[3]

(1) Destruction due to extinction of claims

Debt can be extinguished either because the debtor pays off all its debts during the grace period, or because the creditor exercises his lien after the grace period expires to satisfy his debt. Claims can also be extinguished for other reasons (mixing, offsetting, exemption, etc.). The extinction of the creditor's right, as the subordinate right secured by the creditor's right, naturally disappeared with it.

(2) Eliminated by the debtor negotiating with the creditor to provide another guarantee instead of the lien guarantee

During the creditor's lien period, the debtor may negotiate with the creditor and provide other guarantees such as mortgage, pledge and guarantee to replace the lien guarantee and the lien shall be eliminated. Separate guarantees must be reached between the parties.

(3) Elimination due to abstention of lien holder

Since the lien is a civil right, the creditor can enjoy the right according to law, or he can waive the right. The lien holder abstains from expressing the lien to the debtor.

(4) Destruction due to loss of possession

The creditor's possession of the lien is a prerequisite for the establishment and existence of the lien. The lien person loses possession of the lien, and the lien is abolished. When the lien holder is deprived of possession of the lien, he cannot request a return based on the lien, but can only request the return of the lien in accordance with the tort law.

According to China's "Guarantee Law", the realization of the lien should be carried out in accordance with the following procedures:

1. After the creditor exercises the lien, the debtor shall perform the debt within a period of not less than 2 months; the parties may agree on their own but not less than 2 months.

2. After the expiration of the grace period, if the debtor still fails to perform the debt, the creditor may negotiate with the debtor to discount the liens, or may auction or sell the liens in accordance with the law, and receive the priority payment for the proceeds. If the lien property is discounted or sold, the market price shall be referred to.

Only through application of the subject, object and rights and obligations of the lien can they be linked in a dynamic form in the movement and play a role of security. So what is the scope of application of the lien? ^[4]

Article 89 (4) of the General Principles of the Civil Law states: "If one party possesses the property of the other party in accordance with the contract, and the other party fails to pay the payable amount in accordance with the contract for more than the agreed period, the possessor has the right to lien the property and lien in accordance with the law. The property will be discounted or the property will be repaid first. According to this rule, a lien can only be applied if it is directly provided for by law. If the law does not specify a form of lien as a form of security, it cannot be applied. The author thinks this view is questionable. Looking at the relevant laws and regulations in China, only a few laws and regulations, such as the Regulations on Processing Contracts, stipulate the form of lien as a guarantee, and a large number of regulations that could be applicable to liens, such as the Implementing Rules for Storage Contracts, The Domestic Freight Transport Regulations and the Railway Freight Transport Regulations have not specifically stipulated liens. If the statutory law is a necessary condition for the application of the lien, the scope of application of the lien is greatly reduced, which is disproportionate to the complexity and diversity of China's economic life. In the author's opinion, in order to give full play to the guaranty role of lien in practice, in addition to the statutory lien, there should be an agreed lien, that is, the creditor and the debtor can agree in the contract as long as they have the general requirements for the establishment of a lien (creditor Actual possession of the lien; the debtor can exercise the lien if the debtor fails to perform the debt due to the lien for a certain period of time). In this way, the application of the lien in China's civil activities is roughly as follows:

First, liens can be applied to processing contracts. According to the processing contract, the contractor shall use his own equipment, technology and labor to process, order, repair, repair or complete other work for the ordering party; the ordering party shall accept the items produced by the contractor or the work results completed, And pay. If the ordering party does not receive the set crops within six months of the collection period and pays the remuneration, the contractor has the right to discount or sell the set crops. After deducting the remuneration and storage costs, the remaining return shall be refunded square. Of course, when some contractual contracts fail to make up for the contractor's losses through the use of lien fixed crops, the liability for breach of contract can also be applied to recover the contractor's liquidated damages and compensation.

Second, the lien can be applied to the construction and installation contract in the capital construction contract. According to the construction and installation contract, the construction and installation unit shall complete the construction project agreed with the construction unit on time, quality and quantity; the construction unit shall provide the necessary technical documents and other working conditions on time, inspect the completed project and pay compensation. If the construction and installation unit fulfills its obligations and the construction unit does not pay remuneration for a certain period of time, the construction and installation unit may implement a lien on the construction project and exercise its lien. Of course, due to the tough planning of construction and installation contract, construction and installation units should pay attention not to conflict with the national plan when exercising their lien, otherwise they cannot exercise it.

Third, a lien may apply to a custody contract. According to the custody contract, the custodian keeps the property for the depositor. When the custody contract is terminated, the depositor shall pay remuneration in accordance with the contract. If the depositor refuses to pay the remuneration for a certain period of time, the custodian may exercise the right of lien on its deposit, discount or sell the deposit, and pay its storage fee with the due or obtained price.

Fourth, the lien can be applied to the freight contract in the contract of carriage. According to the contract for the carriage of goods, the carrier shall deliver the consignment to the designated place and deliver it to the consignee, and the shipper shall pay the prescribed transportation costs. If the carrier does not pay the transportation fee for a certain period after the carrier has shipped the consigned goods to the designated place, the carrier may leave the consignment, discount or sell it for compensation.

Fifth, the lien can be applied to property lease contracts. According to the lease contract, the lessor gives the leased property to the lessee for use (revenue), and the lessee pays the remuneration and returns the restored product after the use (revenue) is completed. If the lessee does not pay the lease fee on time, the lessor may retain the corresponding property of the lessee while canceling the lease contract.

Sixth, liens can be applied to entrustment and trust contracts. According to the entrustment contract and the trust contract, the trustee handles certain entrustment matters for the client in the name of the client or in his own name. The client shall compensate the trustee for the expenses incurred in completing the entrusted office and pay a certain remuneration. If, after the trustee completes the entrusted affairs, the client fails to perform its obligations for a certain period of time, the trustee may lien the client's possession of the client's goods or securities and claim compensation therefrom.