Lien priority determines the order in which creditors get paid. Learn how lien priority applies to different types of liens across jurisdictions.
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To understand lien priority, it helps to first have a clear picture of a lien. Liens are a legal vehicle through which creditors can try to collect money owed. Liens attach to property and can result in foreclosure if they go unpaid. Lien priority determines the order in which creditors get paid.
When multiple people/entities are owed money, and there’s only so much money to go around, lien priority helps determine who gets paid first. For instance, if two liens are filed and Lien A has priority over Lien B, Lien A gets paid in full before Lien B will see a dime.
How is lien priority determined? It depends on the type of lien (we’ll be dealing with various property liens on this page) and any state-specific or federal rules that apply to it.
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Lien priority is normally determined on a “first in time, first in right” methodology. On the surface, the meaning is simple: the first lien in line is the first lien to get money.
But, this rule is more of a guideline than an absolute. Certain liens take priority over other liens regardless of the recording date. Plus, states often have their own rules about priority.
Here are a few ways liens are categorized by priority:
Liens are also categorized by whether they’re voluntary or involuntary:
Whether a lien is voluntary or involuntary doesn’t necessarily impact lien priority, but it can be helpful to know how and why a lien is put in place.
Ultimately, there is no formula to determine who will get paid first in every property lien situation. The rules change according to specific circumstances, as described below.
Maybe. If you have a junior lien, whether you get paid depends on how much money there is to go around. For example, if a property is foreclosed on, foreclosure fees and senior liens are paid out first. If there is still money left after those payments are made, money is distributed to junior liens in order of priority.
It depends. By the time a property is foreclosed, the importance of lien priority is in clear view, as junior liens may go unpaid or be nullified.
For example, in a mortgage foreclosure, junior liens such as judgment liens will likely be canceled out as payments will go to senior liens (like first mortgages or property tax liens) instead.
It can be difficult to determine priority for property liens. Many property-related liens theoretically have high priority (even if they weren’t the first to record). In the event of a dispute, figuring out which liens are senior and which liens are junior can be a confusing process that may require lawyers and courts to sort out.
But before you take legal action, here’s an overview of how the priority of various liens might shake out:
Mortgages are liens implemented by property owners. Here’s how lien priority typically applies to mortgage liens:
Tax liens are involuntary and can be imposed by any level of government.
Mechanic’s liens (aka construction liens) are involuntary and occur after there has been a missed payment for provided work or materials. Typically, all mechanic’s liens on the job will have the same priority.
A handful of states, including Oregon and Montana, conditionally allow for mechanic’s liens to have super-priority, so they may end up with higher priority than liens like mortgages or mechanic’s loans.
However, about 20 states grant HOAs super-lien status. In those states, HOA liens are given senior priority under certain circumstances. For example, in Connecticut, HOA liens have priority for six months of past-due payments.