A Quick Guide to Understanding Warehousing Liens

One of the most important, yet often misunderstood, rights available to warehouse owners is the warehouse keeper’s lien.

In this guide, we answer key questions about liens, including what they are, how they work, and what risks are involved in using them incorrectly. 

What Can Warehouse Owners Do If a Customer Doesn't Pay?

If a customer doesn't pay their storage or handling fees, warehouse owners generally have two legal avenues. The first is to issue legal proceedings for non-payment (i.e. suing for the debt). Secondly, you can potentially exercise a lien over the goods being stored.

Exercising a lien can be particularly powerful. This remedy can be faster and more cost-effective than going to court, but only if the legal right to exercise a lien is properly established.

What is a Warehouse Keeper’s Lien?

A warehouse keeper’s lien is a legal right that allows warehouse keepers to retain possession of a customer's goods as security for unpaid charges. In effect, you may refuse to release the goods until the outstanding sums are paid.

It's a form of security interest that benefits warehouse operators by reducing the financial risk of customer default.

There are two types of liens recognised under English law:

1.     Contractual liens — created by express terms in a contract

2.     Common law liens — arising automatically in certain circumstances where the service provider holds goods belonging to someone else

A well-drafted contractual lien gives far greater protection and flexibility than a common law lien so it is advisable to include a well drafted lien in your contracts. The industry standard terms, such as those of the UK Warehousing Association, contain well drafted liens so it is a good idea to become members so that their standard terms can be used in your contracts.

What do you need to enforce a Lien?

To lawfully exercise a lien, you must first establish that you have the right to do so.

Ideally, your customer contract should clearly state that you have a lien over goods held in your warehouse in the event of non-payment.

Alternatively, you may rely on a common law lien, but this is limited in scope, typically only covering charges directly associated with the goods that you actually have in store at the time of exercising the lien.

Once the right is established, enforcement generally requires:

1.     Notice to the customer, in writing, stating that you are exercising your lien and outlining the charges owed

2.     Refusal to release the goods until payment is made

The exact procedure will depend on your contractual terms, so clarity in your terms and conditions is vital.

What are the risks of using a Lien incorrectly?

Exercising a lien without the proper legal basis can expose your business to serious legal consequences.

If it turns out that you had no right to detain the goods, the customer can:

1.     Obtain a court order compelling you to release them

2.     Claim damages for any losses suffered as a result of your refusal to hand them over. 

Given the commercial implications, particularly if high-value or perishable goods are involved, it's essential to seek legal advice before exercising a lien.

Can a Warehouse Lien Be Contested?

Yes, a lien can be challenged by the customer or a third party. Common reasons include:

1. Disputing the existence or incorporation of the lien clause in the contract (e.g. the clause was buried in unread terms and not properly agreed)

2.     Arguing the lien does not apply to the specific charges or situation at hand

3.     Insolvency complications, for example, if the customer is in administration, an administrator's consent or court approval will be required before exercising a lien

4.     The goods are owned by a third party rather than your customer and that third party didn’t know that you would be in possession of the goods or wasn’t aware of the terms on which you would hold them.

This is why clear contractual drafting, proper incorporation of terms, and professional advice are key to successfully relying on a warehouse lien.

Why is it Called a "Lien"?

The word lien comes from the Latin word legare, meaning to bind or to tie. Through Old French, it evolved into the legal French term loyen or lien, meaning "to detain", which is precisely what the legal concept involves: the detention of someone else's goods to secure a debt.

Need Legal Advice on Warehouse Liens?

Warehouse liens are powerful legal tools, but only when used correctly. Our specialist warehousing and logistics solicitors who have a strong relationship with the UKWA, advise clients across England and Wales on the enforcement and drafting of  and challenges to liens.

Get in touch with our team today to discuss your matter.