Glossary

Lien Priority

The order in which competing liens against the same property are entitled to payment from sale or foreclosure proceeds, generally established by the date and time each lien was recorded.

The default first-in-time, first-in-right rule means a first mortgage recorded before a second mortgage is paid in full before the second mortgage receives anything from a foreclosure sale, and the second mortgage is paid before any junior liens. Priority can be altered contractually through a subordination agreement, in which a senior lienholder agrees to move behind a later-recorded interest (common when a ground lease or easement needs to be treated as superior to a later mortgage), or through statutory exceptions such as mechanic's liens (which in many states relate back to the commencement of construction, potentially jumping ahead of a construction loan recorded after work began) and real property tax liens (which are typically superior to all private liens regardless of recording date). Lien priority is the central concept underlying intercreditor agreements in multi-tranche capital stacks, where mezzanine lenders, B-note holders, and preferred equity all negotiate their relative payment and remedy rights against the same collateral.