What is the priority of parties secured by common law and statutory liens?
Possessory Liens – A possessory lien is a common law or statutory interest in an asset that:
- secures a payment for services or material furnished in the ordinary course of business;
- is create pursuant to statute or common law; and
- the asset is under the control of the lien holder. 9-333(a)
A possessory lien, as the name implies, gives priority over other secured parties in situations where an individual has physical possession of the collateral. 9-333(b)
Example: Common types of possessory lien include: repair and storage, boarding of animals, and labor performed or material supplied in course of performance.
Non-Possessory Lien – A non-possessory lien generally arises through judicial or administrative order.
Example: A common form of non-possessory lien is a judgment that is attached to a debtors property.
A possessory lien has priority over an Article 9 security interest, unless the common law or statutory authority for creating the lien indicates otherwise. A non-possessory lien, on the other hand, does not have priority over a security interest that is perfected prior to the establishment of the lien. It does, however, have priority over an unperfected security interest.
