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GlossaryLiensTitle

Lien priority

2 min read
Short answer
Lien priority determines the order in which claims against a property are satisfied. The general rule is first in time, first in right — earlier recording takes precedence. But property tax and special assessment liens outrank everything regardless of when they arose, and mechanic's liens can relate back to when work began rather than when they were filed.

Lien priority is the order in which claims against a property get paid. It decides who recovers and who does not when there is not enough to go round.

The general rule#

First in time, first in right. The lien recorded earlier takes precedence over the one recorded later.

That is why recording promptly matters, and why the gap between signing and recording is a real risk rather than an administrative detail.

The exceptions that matter#

Property tax and special assessment liens outrank everything.

They take priority regardless of when they arose and regardless of what was recorded before them. That is why an unpaid tax bill genuinely threatens a mortgage — the lender's security sits behind a claim it cannot record ahead of.

It is also why servicers pay delinquent taxes and add the cost to the loan rather than letting them accumulate. Protecting the position costs less than losing it.

Mechanic's liens can relate back.

A mechanic's lien may take priority from the commencement of the improvement rather than from the date the lien statement was filed. A lender advancing funds after work has visibly started can therefore find itself behind a lien recorded months later.

This is why construction lenders care about whether work has begun before their mortgage records, and why title companies ask.

Subordination#

Priority can be rearranged by agreement.

A subordination agreement is a junior lienholder consenting to rank behind a lien that would otherwise come after theirs.

The common case is a refinance. A homeowner with a first mortgage and a home equity line refinances the first. Paying off the old first and recording a new one would ordinarily leave the new loan behind the equity line — so the new lender requires the line's holder to subordinate.

Failing to obtain that agreement is a genuine and expensive error, and it is discovered at the worst possible moment.

What priority decides at a foreclosure#

The senior lienholder forecloses. Junior liens are extinguished by the sale.

Any surplus from the sale is distributed in priority order — junior lienholders before the former owner.

And redemption after the sale follows priority too: the most senior junior creditor who filed a notice of intent gets 14 days, then each creditor below in seven-day periods.

Priority therefore governs the whole sequence — who forecloses, who is wiped out, who gets paid from surplus, and who gets to redeem in what order.

Common questions

What determines lien priority?
Generally the recording date — first in time, first in right. The important exceptions are property tax and special assessment liens, which take priority regardless of when they arose, and mechanic's liens, which can relate back to the commencement of the improvement.
Why do tax liens outrank a mortgage?
Because the state's ability to collect property tax would otherwise depend on private lending decisions. It is why servicers pay delinquent taxes and add the cost to the loan — an unpaid tax lien genuinely threatens the mortgage's security.
Does a refinance change priority?
It can, and badly if handled carelessly. Paying off a first mortgage and recording a new one where a junior lien exists can leave the new loan behind that junior lien. Subordination agreements exist to prevent exactly this.
Keep reading
Junior lienholder
A creditor whose lien ranks behind another, whose security is extinguished when the senior lien forecloses unless they redeem.
Judgment lien
A lien on real property created by docketing a money judgment, which in Minnesota attaches for ten years from entry of the judgment.
Mechanic's lien
A contractor's or supplier's lien on improved Minnesota property, which must be filed and served within 120 days of last furnishing labour or materials.