Determining
the priority of liens becomes significant when there are
multiple construction liens, or other encumbrances, against
a parcel of real property that is being foreclosed. A lien
that is junior or subordinate in priority to the lien, or
other encumbrance, being foreclosed is not entitled to a
share of the proceeds of the foreclosure sale until the
senior, and superior, liens have been paid in full from
the foreclosure sale proceeds. Conversely, a construction
lien that is equal in priority to the lien being foreclosed
is entitled to share equally in the foreclosure sale proceeds
with the foreclosing lienor, and pro rata in the event that
the net proceeds from the foreclosure sale are insufficient
to satisfy in full all liens that are equal in priority.
A
Claim of Lien of a professional lienor or a subdivision
improver attaches to the real property and takes priority
only as of the date the Claim of Lien is recorded. As for
all other lienors, the Claim of Lien attaches to the real
property and takes priority as of the date that the Notice
of Commencement is recorded. In the event that a Notice
of Commencement is not recorded, a lien attaches to the
real property and takes priority only as of the date the
Claim of Lien is recorded. The Notice of Commencement instills
fairness in terms of priority of competing lienors. Without
a Notice of Commencement, those lienors who provide labor,
services, or materials near the end of the project will
always be at risk that their lien rights will be impaired
by the existence of earlier recorded, and, therefore, superior
Claims of Lien of lienors who provided their labor, services,
or materials work on the project at an earlier stage of
construction.
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