If you are facing foreclosure, or if you buy property at a tax deed sale, you need to know a little bit about liens and lien priority.
What is a Lien?
First things first. Before you can understand lien priority, you must first know what a lien is.
A lien is a legal claim to secure a debt. It can encumber real or personal property. As we are concerned only with real property, we won’t go into claims filed against personal property (like cars or boats). With regard to your real property, many different agencies, persons or entities could file a lien against your home to secure a debt. This can include liens filed by a Homeowner’s Association (“HOA”) for unpaid dues or assessments, liens filed by the local, state or federal government for unpaid taxes, liens filed by creditors who have a court judgment against you, or even liens by contractors or subcontractors for labor or material for work performed on your home (i.e., “mechanic’s liens” or “materialmen’s liens”).
What is the Effect of a Lien?
If a lien has been recorded against your real property, its effect on your ability to sell or refinance your real property is pretty much like the effect a “boot” (wheel clamp) has on your car. It’s not going anywhere.
Until the lien is removed, it remains on the property. In almost all situations, this means that if you want to sell or refinance your home, you will not be able to. That is because a lien is a cloud on title and you will not be able to convey clear title should you attempt to sell, and most lenders will not lend money against property that has liens on it.
What is Lien Priority?
Part of “perfecting” a lien requires that the lien be recorded in the county where the property exists. In real estate transactions, “lien priority” refers to the position of one lien over another, which determines which gets paid first in a payoff from a normal market real estate sale, short sale or foreclosure. In Georgia, lien priority generally goes by recording date. That means that the lien that is recorded first gets paid first, and so on. Lien priority is important because a lien that has priority over another lien gets paid before the other lien.
There are some exceptions to the general lien priority. Certain liens (sometimes called “super liens”) take priority regardless of when they were recorded. As understanding lien priority is important and this is a complicated area of law, it is best to consult with experienced real estate counsel if you are dealing with liens filed against your property.
Helping People in Georgia Protect Their Property Rights. If you need real estate advice, contact us. We are experienced real estate attorneys practicing in Georgia. We have offices in Cumming and we serve Atlanta and multiple counties, including: Clayton County, Cobb County, Dekalb County, Douglas County, Fulton County, and Paulding County, among others. To schedule your free phone consultation, call us at: 770-888-7707. Or contact us here.