How Is Priority Determined for Multiple Judgment Liens?

A judgment lien is a legal claim placed on a debtor’s property after a creditor wins a lawsuit for an unpaid debt. This lien acts as security, giving the creditor an interest in the property until the debt is paid. When multiple creditors have filed liens against the same piece of property, a system of priority determines the order in which they are entitled to payment. This hierarchy dictates who gets paid first when the property is sold or foreclosed upon.

The “First in Time, First in Right” Doctrine

The primary rule governing the priority of most liens is “first in time, first in right.” This principle establishes that liens recorded earlier have priority over liens recorded later. It functions like a queue, where the first creditor to officially secure their claim against a property gets the first opportunity for payment from that property’s sale proceeds. Subsequent creditors line up behind the first, in the order their liens were established.

“Time” in this context almost always refers to the moment the lien is officially recorded with the proper government office, not the date the court issued the judgment. A creditor may win a lawsuit, but their priority position is not secured until the judgment is formally entered into the public record. This act of recording is what puts the world on notice of the creditor’s claim against the property.

The Role of Recording in Establishing Priority

The act of recording a judgment lien solidifies a creditor’s place in the priority line. This process involves filing a certified copy of the court’s judgment, often called an “abstract of judgment,” with the appropriate public records office. This is the county recorder’s office or a similar office in the county where the debtor owns real property.

Recording a lien serves a function known as providing “constructive notice.” This legal concept means that once the lien is in the public record, everyone, including potential buyers or other lenders, is considered to have knowledge of the lien’s existence. This official documentation establishes the “time” for the “first in time, first in right” rule, so meticulous adherence to the recording requirements is a necessary action for a creditor.

Liens with Special Priority Status

While the “first in time, first in right” rule is the general standard, certain types of liens are granted special priority by law, allowing them to bypass earlier-recorded judgment liens. These liens can “jump the line” and take first position for payment, regardless of when they were recorded. The most common example of a lien with this status is a real property tax lien. To ensure collection, these tax liens are almost universally given “super-priority,” meaning they are paid before all other liens, including pre-existing mortgages and judgment liens.

Other liens can also receive special treatment. Federal tax liens have their own set of priority rules under federal law, such as 26 U.S.C. Section 6323, which can give them precedence. Some states also grant super-priority status to liens for certain government-mandated charges, like special assessments for public improvements or liens from homeowners’ associations.

Priority Between Judgment Liens and Other Encumbrances

Judgment liens must compete for priority with other types of financial claims, or encumbrances, placed on a property. The most common voluntary encumbrance is a mortgage or deed of trust. If a mortgage is recorded before a judgment lien is filed, the mortgage has priority and will be paid first from any sale proceeds.

Conversely, if a judgment lien is recorded before a new mortgage is put in place, the judgment lien will have the senior position. This is why lenders conduct thorough title searches before approving a loan, as a pre-existing judgment lien can be an obstacle to a property owner trying to sell or refinance.

Mechanic’s liens are filed by contractors or suppliers who were not paid for work or materials provided to a property. In many jurisdictions, the priority of a mechanic’s lien can “relate back” to the date work first began on the project, not the date the lien was recorded. This means a mechanic’s lien could gain priority over a judgment lien that was recorded after construction started but before the mechanic’s lien was officially filed.

Enforcement and Distribution of Sale Proceeds

Once the priority of all liens is established, enforcement can begin, typically through a forced sale of the property known as a sheriff’s sale or foreclosure. The proceeds from the sale are then distributed to the various lienholders in a specific order determined by their priority. First, the costs associated with the sale itself are paid.

After these expenses are covered, the remaining funds are distributed to the lienholders according to their established rank, with the first-priority lienholder paid the full amount they are owed. If any money is left after the first lienholder is fully paid, the funds flow to the second-priority lienholder, and so on down the line. This continues until all lienholders have been paid or the money from the sale runs out. Junior lienholders with lower priority often receive only a partial payment or nothing if the sale proceeds are insufficient to cover all senior debts. Any surplus funds remaining are given to the former property owner.