Lien Priorities

August 12, 2023


In judgment enforcement, when a judgment debtor has or will own real estate property; recording liens, and the lien priority can be very important. The theory is, when there is sufficient equity in a judgment debtor’s property, you get paid if their property is refinanced or sold. Usually, however not always, the first to record a lien wins. My articles are my opinions, and not legal advice. I am a Judgment Broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

The “first to record a lien wins” means the lien that gets recorded first chronologically, is the lien with the superior position over other liens. The first to record a lien is the most likely to be repaid something.

Presuming that the liens are kept valid, it usually does not matter if the other liens are a mortgage lien, mechanics lien (this will only cloud the title to the property, and expires quickly), etc. Mechanics Liens usually have strict rules, and it one of the few liens that can cloud a property title without a judge’s signature.

In California, Mechanic’s liens can be recorded and cloud the property title by the general contractor on the job; or by a sub-contractor, materials supplier or others such as architects, engineers, etc. If one is not the general contractor, they must have processed and filed a preliminary lien notice to inform the property owner of their involvement on the construction project.

When a mechanic’s lien has been recorded, it must be foreclosed by bringing it to court for a civil foreclosure action within 90 days. Do not buy mechanic’s liens unless you intend to use a lawyer to start a civil action to get a judgment. The first properly recorded lien is usually superior. Superior liens and senior liens are usually the same thing. Usually, superior means a higher-ranking lien like a tax lien, and senior means the oldest and first recorded lien. In some places, mortgage liens outrank common judgment creditor liens.

If a judgment debtor’s property is sold in a foreclosure or a Sheriff’s auction sale, the money goes toward paying the superior lien first. When a superior lien holder forecloses on a property, all junior liens can be wiped out if there is no equity left to pay them. If and when there is leftover equity, others with perfected liens against the judgment debtor’s real estate property will be paid in the order of their seniority, until the money runs out.

If you hold a real estate judgment lien against a person or entity, you may wish to check the county recorder records for any other liens, to check whether your lien is superior or not. This may become important if the sale of your judgment debtor’s property will not bring enough money to pay off all the lien holders. If a judgment debtor dies, sometimes their funeral and last illness expenses are taken off the top, before creditors get anything.

Note that the first to record does not always win. Laws on property liens vary in each state. In some states, for example Florida, banks seem to always win, even when they loan money after another creditor has recorded and perfected their lien. Certain states, including Florida have an unlimited homestead exemption for the property a judgment debtor lives in, so no matter what lien you have recorded there, it may not accomplish anything.

When a taxing authority holds a lien against a debtor’s property, it is usually superior to all others. A Federal tax lien may sometimes even attach to a homesteaded property in debtor-friendly states.

In most states and situations, with other kinds of judgment debtor assets, for example bank accounts, wages, and personal property; the existence of passive tax liens is not usually important, because the first to levy such assets usually wins. Of course, if one had the Sheriff garnish the wages of a judgment debtor, a government taxation authority, or a child support creditor or an agency for them; could outrank and push aside a regular judgment creditor’s garnishment. However if a tax or child support-related entity does not take any garnishment actions, the regular judgment creditor’s levy can proceed, and may succeed.

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