Unpaid Vendor Liens

We consider below the circumstances in which a person may hold an "unpaid vendor lien", the effect of such a lien following the Supreme Court case of Menelaou v Bank of Cyprus UK Ltd [2016] EWHC 2656, and what best practice should be going forward on transactions where such a lien may arise.

What are they and how are they relevant in a finance transaction?

Financing transactions frequently involve providing finance, directly or indirectly, for the acquisition of an asset, for example a property or shares in a company.  The vendor has a lien on the property or shares until the purchase money has been paid.

This can arise, for example, where all or part of the consideration is deferred or is left outstanding as a debt owed by the buyer to the vendor.  Where the lender has taken security over the property or shares, then the vendor is in effect a competing secured creditor.  In this scenario the lender will be concerned to ensure that the vendor either waives its