Priority of Mechanic's Liens
One of the most important aspects of the power of mechanic’s lien is its priority over other liens or deeds of trust. Generally, liens on property follow the rule of “first in time, first in line” meaning that the priority of liens are determined based on the timing of the recording of the lien. To the untrained contractor or lawyer, this would mean that a contractor’s mechanic’s lien could be junior to a deed of trust for the benefit of a lender if the contractor records a mechanic’s lien at the end of the project for non-payment, while the lender records s deed of trust during the project. Yet the law provides contractors better protection than that.
Pursuant to Civil Code Section 8450, the mechanic’s lien’s priority is determined based on the date work was commenced. As such, even though the mechanic’s lien is recorded after the lender’s deed of trust, it relates back to the date of commencement of the work and has priority over the lender’s deed of trust.
The following example should clarify this law:
- Date of commencement of construction work: August 1
- Date of recording of Deed of Trust for benefit of bank: September 1
- Date of recording mechanic’s lien: December 1
Based on Section 8450, the priority date for the mechanic’s lien relates back to August 1, thereby placing it in a position senior to the Deed of Trust. As such, in the event of a foreclosure, the mechanic’s lien will be paid prior to the deed of trust. In order to achieve this result, however, an experienced attorney needs to adjudicate the foreclosure of mechanic’s lien action so that the judgment that is obtained provides language relating the priority date of the mechanic’s lien back to the date of commencement of work and thereby superior to the deed of trust.
© 2017 Marina Manoukian