In California, three liens exist against a property: (1) a property tax lien for $8,000, (2) a first deed of trust recorded on January 15 for $300,000, and (3) a mechanics' lien for work that commenced on January 5, recorded on April 10. The property is sold at foreclosure for $350,000. In what order are the lien holders paid?
Correct Answer
A) Property tax lien first, then mechanics' lien (relates back to January 5), then deed of trust
Under California law, property tax liens always have first priority over all other liens. Next, the mechanics' lien relates back to the date work commenced (January 5) under Civil Code §8450, giving it priority over the deed of trust recorded on January 15. Therefore, the order is: (1) property tax lien — $8,000, (2) mechanics' lien — paid next, (3) first deed of trust — paid last from remaining proceeds.
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