Lien priority determines the order in which creditors or claimants get paid from the proceeds of a property sale, such as during a foreclosure or bankruptcy. It’s a critical concept in property law because multiple liens can exist on a single property, and there’s often not enough money to satisfy all of them fully. Here’s a clear explanation of how lien priority works, with a focus on general principles and some context relevant to your earlier questions about Kansas property taxes and special assessments.
General Rule: "First in Time, First in Right"
The default rule for lien priority is that the lien recorded or perfected earliest has the highest priority. This means the first lienholder to establish their claim legally (usually by recording it with the county) gets paid first from the property’s sale proceeds. Subsequent liens follow in the order they were established. However, this rule has exceptions based on lien type and jurisdiction-specific laws.
Types of Liens and Their Priority
Liens fall into different categories, and their nature often affects their priority:
- Tax Liens (Property Taxes)
- Priority: Property tax liens, like those under K.S.A. 79-1804 in Kansas, are typically "super-priority" liens. They take precedence over almost all other liens, even those recorded earlier, because governments rely on tax revenue for public services.
- Reason: The law prioritizes the public interest over private claims.
- Example: If property taxes go unpaid, the county can foreclose and wipe out junior liens (e.g., mortgages), ensuring the tax debt is satisfied first.
- Special Assessment Liens
- Priority: In many states, including Kansas, special assessment liens (e.g., for infrastructure improvements) often share equal or near-equal priority with property tax liens. Under K.S.A. 79-1804, they’re treated as part of the tax roll and can have priority over private liens like mortgages. However, if there’s a conflict between property taxes and special assessments, property taxes might edge out slightly, depending on local rules.
- Reason: Like property taxes, special assessments fund public benefits tied to the property.
- Mortgage Liens
- Priority: Mortgages are voluntary liens created when a property owner borrows money and secures the loan with the property. Their priority is determined by recording date. A first mortgage (recorded first) has higher priority than a second mortgage.
- Exception: Mortgages are usually subordinate to tax and special assessment liens, even if recorded earlier, due to the "super-priority" status of government liens.
- Mechanic’s or Construction Liens
- Priority: These arise when contractors or suppliers aren’t paid for work on the property. Priority often depends on when the work began or when the lien was filed, but they’re typically junior to tax liens and prior-recorded mortgages.
- Kansas Note: Under K.S.A. 60-1101 et seq., mechanic’s liens must be filed within a specific timeframe, and their priority can "relate back" to the start of work, potentially jumping ahead of later mortgages.
- Judgment Liens
- Priority: These result from court judgments (e.g., unpaid debts) and are usually subordinate to all prior-recorded liens, including taxes, assessments, and mortgages.
- Kansas Example: Per K.S.A. 60-2202, judgment liens attach when filed but don’t override earlier liens.
How Priority Plays Out in Practice
Imagine a property worth $100,000 with these liens:
- Property taxes: $5,000 (delinquent, lien filed 2023).
- Special assessment: $3,000 (delinquent, filed 2023).
- First mortgage: $70,000 (recorded 2020).
- Second mortgage: $20,000 (recorded 2022).
- Judgment lien: $10,000 (filed 2024).
If the property is sold at a tax foreclosure for $100,000:
- Property taxes ($5,000) get paid first due to super-priority.
- Special assessment ($3,000) is next, often co-equal or just behind taxes.
- First mortgage ($70,000) follows, assuming funds remain.
- Second mortgage ($20,000) and judgment lien ($10,000) get whatever’s left, if anything.
Here, after taxes and assessments ($8,000), only $92,000 remains. The first mortgage gets $70,000, leaving $22,000. The second mortgage takes $20,000, and the judgment lien gets $2,000—leaving it partially unpaid. If the sale price were lower, junior lienholders might get nothing.
Exceptions and Modifications
- Subordination Agreements: Private lienholders (e.g., mortgage lenders) can agree to change their priority order voluntarily.
- Statutory Rules: Laws like K.S.A. 79-2804 (judicial tax foreclosure sales) in Kansas can extinguish junior liens entirely when a tax sale occurs, resetting the priority slate for the new owner.
- Equitable Subrogation: In rare cases, courts may adjust priority to prevent unfairness (e.g., if a new lender pays off an old lien).
Kansas-Specific Context
Since you asked about delinquent special assessments and referenced K.S.A. 79-2801(c), note that in Kansas:
- Both property tax and special assessment liens are enforced through the same tax foreclosure process, giving them top-tier priority.
- K.S.A. 79-1804 explicitly states that tax liens (including assessments certified to the tax roll) are "first liens" ahead of other encumbrances, regardless of recording dates.
Bottom Line
Liens are paid in this rough order: government tax/assessment liens first, then mortgages by recording date, followed by other liens like mechanic’s or judgment liens. Tax and special assessment liens almost always trump private claims due to their public purpose. If you’ve got a specific scenario in mind, I can tailor this further—just let me know!
