Legal Talk

What Is A Lien And When Can It Be Used

Broadly speaking a lien may be described as a right of retention, which a person has over some else's property because of some contractual obligation. A lien allows the person who has incurred expenditure or spent money on someone else's property, to retain that property in his possession until he has been compensated by the owner for what he has spent on that property.

This right is applicable against all third parties and indeed the entire world. The term used in these instances would be unjust enrichment. This is when a bona fide possessor of a property is allowed on the ground of unjust enrichment to claim compensation from the owner of the property for all necessary and useful expenses he has incurred.

An example where a lien could apply could be if an occupier of a house who is not the owner (for example a tenant) has made certain improvements to the property which he occupies.This right of retention is called a debtor and creditor lien.

There are many types of liens, including a real lien, improvement lien, an enrichment lien or a salvage lien. It's important to remember that even though a person may have spent a considerable amount of money improving someone else's property, the "creditor" will not compensated for 100% of all his expenses, even if he was able to produce invoices for all the money spent on improving the property.

This is because the improvement has to be identified as to whether it was a necessary, useful or luxurious expense that was incurred. Each of these category of improvements carries a different set of claim allowance. Necessary expenses are those expenses which were necessary to preserve the property and to prevent it from being destroyed.

Useful expenses, on the other hand are those expenses, which although not necessary, nevertheless enhances the value of the property. Finally, luxurious expenses are those which add to the amenity of the property without improving its usefulness or necessarily enhancing its value.

So how much compensation is allowed for these three types of improvements As it's to be expected, all necessary expenses may be recovered in full. If the improvement is a useful one, then the norm is that a person may only recover the amount by which the value of the property has been enhanced by or the actual amount spent, whichever is the lesser amount.

Sadly, if the improvement is deemed to a luxurious one, then the bona fide possessor is normally not entitled to any compensation. He is allowed to remove the improvement provided it can be done without damage to property. Compensation will only be payable where the improvements are still in existence or where the necessary expenditure has served its purpose by preserving the thing.

Thus, for example if repairs to a retaining wall is regarded as a necessary expense, but if heavy rains wash away the repaired wall, no compensation may be claimed. A lien does not apply only where there was some contractual obligation to be met. It also applies where was no agreement between the parties.

A salvage lien is such an example. A salvage lien allows a person to claim for all necessary expenses which was incurred to prevent a thing from perishing. It's based on the equitable principle that no one shall be enriched at the expense of another.

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