A lien is another form of property right relating to security for a debt. It authorises a person to keep property pending the payment of a debt, or if the debtor still has possession of the property, to seize it and keep it until the debt is paid, or sell it to recover the debt.
If, for example, you ask a motor mechanic to fit your car with a new engine they may legally keep the car until you pay the bill. If you take a mare to a stud to be serviced by their stallion, the stud may keep the mare (and its foal) until the service fee and all stud fees have been paid. Many breeding contract contain such a lien clause.
A lien may be exercised by selling the property in question (the car or the mare and foal in the examples above). In that case the creditor may retain the amount owed and any costs incurred in exercising the lien, but must refund to the debtor any money received in excess of that owed.
So far this section has covered the common law or traditional lien. Liens specific to crops, wool and livestock are still used today, though more by pastoral houses and rural trading companies than by banks and finance houses. If, as a farmer, you incur large debts, your creditor may require you to execute a lien over your next wool clip or crop. The applicable law in Victoria is to be found in the Instruments Act 1958 (Vic.).
Like a stock mortgage, for a lien to be effective it must be registered in the General Register of Deeds within 30 days of the agreement. A wool lien may, depending on its terms, entitle the creditor to possession of the clip when the sheep are shorn (s. 70) although more often, the debtor (or lienor) will sell the wool and pay off the debt with the proceeds.
The format of the wool lien is contained in the seventh schedule to the Act. It also is much simpler than a real property mortgage.
A crop lien (see Part 7 of the Act) is similar to a wool lien. The security for the debt is the next agricultural or horticultural crop identified in the lien document. It must be registered within 10 days.
A crop lien is unaffected by the death or bankruptcy of the lienor (the crop owner) or by the sale or mortgage of the land on which the crop is growing (s. 62). The format of a crop lien is shown in the sixth schedule to the Act.
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