What does "priority of liens" refer to?

The concept of "priority of liens" specifically relates to the order in which different liens are paid when property is sold, particularly in the case of foreclosure or liquidation. When a property is sold, the proceeds are distributed to satisfy any outstanding liens, starting with the highest priority. This means that the liens with the first priority will be paid first, and only after that are lower-priority liens addressed.

Understanding this concept is crucial for both property owners and lienholders, as it affects the likelihood of recovering funds in case of a sale or foreclosure. For instance, a first mortgage lien generally takes precedence over a second mortgage lien, meaning that in the event of a sale, the first mortgage will be satisfied before any payments are made to the holder of the second mortgage. This hierarchy ensures structured repayment with financial implications for all parties involved.