Equitable Lien

A lien arising out of a written contract that shows an intention of the parties to charge some particular property as security for a debt or obligation. A court may decide that an equitable lien exists based on principles of fairness and justice, such as when the parties intended to create a lien but there was a defective execution of a mortgage instrument. Examples of equitable liens include a vendee’s lien, which a buyer holds against a property in the amount of the deposit when a seller defaults in the performance of a sales contract, and a vendor’s lien, which is the security lien behind a purchase-money loan that is not secured by a mortgage. Occasionally, a lender will make an unsecured loan but have the borrower agree not to convey or encumber the real property owned by the borrower.