In judgment enforcement, when a judgment debtor has or will own real estate property; recording liens, and the lien priority can be very important. The theory is that when there is sufficient equity in a judgment debtor’s property, you get paid if their property is refinanced or sold. Usually, however not always, the first to record a lien wins. My articles are my opinions, and not legal advice. I am a Judgment Broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.
The “first to record a lien wins” phrase means the lien that gets recorded first chronologically, is the lien with the superior position over other liens. Superior liens and senior liens are the same thing. Presuming that the liens are kept valid, it usually does not matter if the other liens are a mortgage lien, mechanics lien, or a judgment lien, etc., the first properly recorded lien is usually superior.
If a judgment debtor’s property is sold in a foreclosure or a Sheriff’s auction sale, the money goes toward paying the superior lien first. When a superior lien holder forecloses a property, all junior liens can be wiped out if there is no equity to pay them. When there is leftover equity, others with perfected liens against the judgment debtor’s real estate property will be paid in order, until the money runs out.
If you hold a real estate judgment lien against a person or entity, it will behoove you to check the county recorder records for any other liens, to check for sure whether your lien is superior or not. This may become important if the sale of your judgment debtor’s property will not bring enough money to pay off all the lien holders. If a judgment debtor dies, sometimes their funeral and last illness expenses are taken off the top, before creditors get anything.
Note that the first to record does not always win. Laws on property liens vary in each state. In some states, for example Florida, banks seem to always win, even when they loan money after another creditor has recorded and perfected their lien. Certain states, including Florida have an unlimited homestead exemption for the property a judgment debtor lives in, so no matter what lien you have recorded there, it may not accomplish anything. When a taxing authority holds a lien against a debtor’s property, it is usually superior to all others. A Federal tax lien may sometimes even attach to a homesteaded property in debtor-friendly states.
In most states and situations, with a few other kinds of judgment debtor assets, for example bank accounts, wages, and personal property; the existence of passive tax liens is not usually important, because the first to levy usually wins. Of course, if one had the Sheriff garnish the wages of a judgment debtor, a government taxation authority, or a child support creditor or an agency for them; could outrank and push aside a regular judgment creditor’s garnishment. However if a tax or child support-related entity does not take any garnishment actions, the regular judgment creditor’s levy can proceed, and may succeed.
- Know Your Notice Requirements: Georgia only requires preliminary notice when two conditions are met. First, the property owner filed a Notice of Commencement on the project. Second, you contracted with a general contractor or someone other than the owner of the property. If this is the case, then you need to send a preliminary notice within 30 days of when you first work on the project or within 30 days of when the Notice of Commencement was filed. If those two conditions are not met, then preliminary notice is not required. However, sending notice to the property owner of unpaid bills may still be a good idea as it can help motivate the person you contracted with to pay you.
- Know Your Deadline: While some states have different filing deadlines for different types of projects, in Georgia, a mechanics lien must be filed within 90 days from the date on which the work was performed or materials supplied.
If a responsible managing officer/employee RMO/RME is not participating in the construction activities or actively involved in the day-to-day operations of the corporate entity, the California Court of Appeal in Buzgheia v. Leasco Sierra Grove (1977) 60 Cal.App.4th 374, has held that it is as if the contractor is not licensed at all. In other words, the contractor is a sham and is unlicensed by operation of law.
By virture of the Diani testimony Cridlebaugh, specifically, the corporate licensed entity, JC Master Builders, Inc., was deemed an unlicensed contractor for the White project and had to disgorge all monies paid to them by the Whites. Pursuant to B&P 7031 they were also not entitled to advance their own lawsuit against the Whites.