Negative Lien

Negative Lien

Negative Lien

A lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid, provided that there is no contract express or implied, to the contrary.

When goods and securities are in possession of borrowers creditor obtains an undertaking from the borrower that he will not create any charge on those securities without the prior permission of the creditor this kind of lien is called as a negative lien.

Lien is the right to retain goods of a borrower for the debt. Negative Lien is used in banking idiom for a borrower to undertake not to make any charge on his property without the sanction of the lender. Under the negative lien, the Banker does not get right to keep any asset of the borrower. The Borrower gives a statement to the Banker that his assets mentioned therein are free from any charge or hindrance. The borrower might sometime be having non-encumbered assets which are not charged to the bank as security. The borrower is thus free to deal with these assets and might even sell them if he so desires.

Share This Post