A lien created by agreement, also known as a consensual lien or voluntary lien, is a legal concept that arises when two parties agree that one party can have a security interest in the property of the other party.
In simpler terms, it means that a person can put a lien on another person`s property after an agreement is made between them. This lien provides the person who put the lien with the right to claim the property in the event of a default by the other party.
For example, if you borrow money from a bank to purchase a car, the bank will put a lien on the car. This lien provides the bank with the legal right to repossess the car if you fail to make your loan payments.
A lien created by agreement can be established through a contract, agreement, or even a promissory note. It can also be created when a party gives someone else permission to use their property as collateral for a loan.
The lien holder has certain rights and responsibilities when it comes to the lien. They have the right to sell the property in order to recover their debt if the borrower defaults. However, they also have certain responsibilities to protect the property and not use it in a way that would damage it.
In order to establish a lien created by agreement, certain legal requirements must be met. The agreement must be in writing, signed by both parties, and must describe the property being used as collateral. Additionally, the agreement must be filed with the appropriate government agency to make it official.
In conclusion, a lien created by agreement is a legal tool that can be used to secure a debt. It provides the lien holder with certain rights and responsibilities, and must be established according to certain legal requirements. It is an important concept to understand for anyone involved in lending or borrowing money.