Unperfected Lien

DEFINITION of 'Unperfected Lien'

A lien for which the holder has not provided a valid claim. Unperfected liens leave lenders open to the possibility that other creditors can challenge for the collateral being used in the loan. These liens are usually honored in court when the dispute is only between the borrower and the lender, but often fail to weather challenges mounted by third parties.

BREAKING DOWN 'Unperfected Lien'

Liens can remain unperfected for many reasons. Lenders that neglect to record their statement of financing for a piece of property that attaches the lien have failed to perfect their lien. Failure of a lender to discover a previously filed lien also renders their lien unperfected.

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