What does "lien priority" refer to?

Lien priority refers to the order of payment for claims against a property, which is essential in determining the sequence in which debts secured by liens on a property will be paid in the event of a sale or foreclosure. When multiple liens exist against a property, lien priority dictates that certain liens are satisfied before others, influencing creditors’ rights and potential recovery.

For example, first mortgages typically have the highest priority, meaning they are paid off first from the proceeds of a sale or foreclosure. Other liens, such as second mortgages or mechanic’s liens, will only be paid once the first lien is fully settled. Understanding lien priority is crucial for both property owners and creditors, as it affects the risks involved in lending, property investment, and the overall value of the property in relation to its encumbrances. This hierarchical structure ensures a systematic approach to addressing multiple claims against a single asset.