The Basics of Mechanic’s Lien Priority
The Basics of Mechanic's Lien Priority
Mechanic's lien priority functions differently than the priority of other types of liens. As is generally the case, a lien priority is typically determined by the timing of their filing. For example, the first lien filed with the Recorder of Deeds will be the first mortgage, which carries with it first priority as a creditor to any proceeds from a sale or foreclosure of the property. If a second mortgage is filed with the Recorder of Deeds at a later time, it will be the second mortgage. If and when the property is foreclosed upon, the second mortgage will not receive any payments on their amount due until the first mortgage is paid in full.
Of the few exceptions to the “first in time, first in right” rule, one is county real estate tax liens which have absolute priority. A second exception is that the District of Columbia Mechanic’s Lien is considered “inchoate,” meaning it relates back to the time the labor or material is supplied to the property. As such, any judgment lien or mortgage lien recorded following the inception of the work on the property will take a lower priority to the Mechanic’s Lien Priority.
In general terms, the District of Columbia Mechanic’s Lien carries priority over all other liens and mortgages once work has commenced. Mechanic's lien priority does not, however, take priority over construction loan advances created following the filing of the Notice of Mechanic’s Lien. The Mechanic’s Lien Priority only presupposes post-notice advances, despite a construction loan recorded before the Notice. It should also be noted that a District of Columbia Mechanic’s Lien priority does not carry over a mortgage used to pay the full purchase price of the property.
When the related improvement also includes subcontractors, it is important to know where the subcontractor’s Mechanic’s Lien would lay in the line of priority. Subcontractors take priority over general contractors. When the proceeds from payments on the liens of subcontractors are not sufficient to pay the claims in full, they are distributed on a pro rata basis.