Remember: Your Construction Lien Priority is Important

If you have lien rights, your lien priority is important.  Why?  Because the value of the lien is really only as good as (a) the priority or superiority of your lien compared to other encumbrances on the property and (b) the equity in the property considering any lender’s mortgage will generally have priority.   For instance, with respect to the latter point, if a lender forecloses and your lien is subordinate to the mortgage, then your lien is not going to provide you much relief if there is not enough equity in the real property to even cover the mortgage.

To maximize lien priority, it is important that the lien is recorded within an effective Notice of Commencement.  The reason being is that your lien will relate back in time to an effective Notice of Commencement (if you are a contractor, subcontractor, sub-subcontractor, or supplier).  Otherwise the lien will take effect as of the date it is recorded.  For example, assume these facts:

Notice of Commencement (effective for one year) recorded on 1/1/14

Mortgage recorded on 2/31/14

Lien recorded on 11/30/14

Lien recorded on 3/1/15

Under these facts, the lien recorded on 11/30/14 will have priority over the mortgage recorded on 2/31/14 even though the lien was recorded after the mortgage because the lien will relate back in time to the earlier recorded Notice of Commencement.  On the other hand, the lien recorded on 3/1/15 was recorded outside an effective Notice of Commencement.  This means this lien will be inferior to both the 11/30/14 lien and the 2/31/14 mortgage.

Don’t forget: the priority of your construction lien is important, especially when it comes to lien foreclosure actions!

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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