GENERAL RULE: FIRST RECORDED WINS

A piece of property can have many liens and other interests against it. What determines which lien or interest is senior, and gets paid first? California law has one general rule answering this question, and many exceptions.

The general rule is that the first created lien, or other interest in property, prevails over later created liens and interests. “California follows the “first in time, first in right” system of lien priorities…” Friery v. Sutter Buttes Savings Bank (1998) 61 Cal. App. 4th 869, 878. Civil Code Section 2897 provides that, “Other things being equal, different liens upon the same property have priority according to the time of their creation…”

This rule assumes that all parties have notice of each other’s liens or interests, and the time of their creation. Notice can be either actual notice (meaning that this person had personal knowledge of the matter) or constructive notice (meaning that the law will presume that the person knew about the matter, whether or not he or she actually did know.) As a rule, if a lien or other interest in real property is properly recorded, then everyone who deals with that property in the future is deemed to have constructive notice of the recorded lien or interest. Civil Code Sections 1213, 1214 and 1215. Hochstein v. Romero(1990), 219 Cal. 3rd 447.

In short, if a lien or other interest in real property is properly recorded, it is generally safe to assume that it will be senior in right to all later-created liens or interests in that property. Note, however, that California law does NOT hold that the first-recorded lien is necessarily senior to a later-recorded or a never-recorded lien. If a later-recorded, or never-recorded, lien was created prior to the creation of the first recorded lien, and if the holder of the first recorded lien had actual notice of the creation of the later-recorded, or never-recorded lien, then the first recorded lien might not have priority.

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