Liens: mechanics' liens, judgments, tax liens, assessments, and priority

What a lien does

A lien is a charge against property securing payment of an obligation. It is an encumbrance, not ownership or a right to occupy. Classify a lien in two ways: voluntary or involuntary describes its origin; specific or general describes its reach. A consensual deed of trust is voluntary and specific. A mechanics' lien is involuntary and specific.

Identify the claim

A mechanics' lien secures qualifying unpaid labor, services, equipment, or materials furnished to improve real property. It burdens the improved property. California claimants must satisfy applicable notice, recording, and enforcement requirements; unpaid work alone does not complete the lien process. An owner who paid the general contractor can still face a qualifying unpaid subcontractor's claim.

A judgment is a court's determination of liability. In California, recording an abstract of a money judgment generally creates a lien on the debtor's nonexempt real property in that county, including qualifying later-acquired property. This is a general, involuntary lien; entry of judgment alone is not the same as recording the abstract.

A real property tax lien is specific to the taxed parcel. An income tax lien generally reaches the taxpayer's property more broadly. A public special assessment charges benefited parcels for a particular improvement, such as a sewer project; distinguish it from an ad valorem property tax based on assessed value. A homeowners association assessment is a different obligation, with its own lien requirements and priority rules.

Rank the claims

Priority determines which claim comes ahead of another. Recording order is a useful starting point for ordinary consensual liens, but statutory exceptions and subordination agreements can change the result. California real property tax liens generally have priority over private liens. Do not give every kind of tax or assessment lien that same rank. California mechanics' lien priority can relate back to commencement of the work of improvement, rather than the later date an individual claimant records a lien.

For example, an ordinary deed of trust recorded before construction starts normally outranks mechanics' liens for that construction. A deed of trust recorded after work starts can be junior even if recorded before the mechanics' claim. A subordination agreement lets a lienholder accept a lower rank.

Apply priority at a sale

A foreclosure under a junior lien generally leaves senior liens against the property. California Civil Code section 2924f requires a warning that the highest bid does not assure clear title. Proper foreclosure of a senior lien generally eliminates subordinate liens from the property, but does not necessarily erase the underlying debts. Actual priority and sale effects depend on the lien type, dates, notice, and applicable law; investigate the title record and obtain appropriate professional review.

California Civil Code section 2924.7 also makes qualifying loan clauses enforceable for failure to pay taxes or assessments even without impairment of the security. Keeping loan installments current does not excuse these obligations.