What ensures the order of the recording to be considered a first, second, or third? How do you know the recorder did not make a mistake and record the documents out of order? You may request and pay for a title insurance policy from an insurance carrier. The title insurance policy guarantees your lien priority position, without which the carrier may be required to pay an incorrect insured claim.
If you were to go to the recorder ' s office, stand in line, and have your documents recorded, you should check the recording sequence yourself. But, generally, the recording of documents is done by a title company carrier as part of a sale or loan transaction.
Assume that a property is encumbered with a first lien of $ 500,000, a second lien of $ 100,000, and a third lien of $ 50,000! Assume all were recorded on a subject property properly. If the first lien is paid in full and the trustee records a reconveyance, that procedure will remove the first lien from public records. The second lien would become a first lien, and the third would become a second lien.
A reconveyance is a written form signed by the trustee that is recorded when the lien is paid in full and fully satisfied. The reconveyance shows publicly that the lien has been released and removed from public records. At the point of recording, the security interest is extinguished. Recording the reconveyance is usually done by a title company handling the title work for sale or refinance transactions.
Some states use a satisfaction of mortgage document rather than a reconveyance, but they are essentially the same.
If you were to refinance the same property and replace all three liens into one new single loan, all three liens would be reconveyed by the trustees and removed from public records. A new recording of the single loan with a fresh date stamp and recording number would reflect the new first lien position. The system works well if, for a fee, a title insurer provides an insurance policy that guarantees the lien positions.
7) Voluntary vs. Involuntary liens:
A voluntary lien is a claim that a person or a lender has against the property of another as security for payment of a voluntary debt as agreed to by a borrower. The lien is attached to the property rather than the person. A trust deed or mortgage lien is a voluntary lien. The lien involves legal claims on assets such as real property. An owner may not sell the property or convey title to a third party without acknowledging, dealing with, or extinguishing the lien.
The recorded notice that a lien exists is with the county or municipal recorder’ s office. Recording any lien or encumbrance against the private property will cloud the title.
A party may cloud the title for involuntary claims by recording a lien against private property. The owner did not agree to the lien. However, encumbering the property is a method to enforce claims for involuntary debts. This claim includes obligations such as local, state, and federal tax liens, a notice of substandard conditions, contractor claims for mechanics liens, homeowners association dues, child support payments, and judgments from civil suits.
Liens may be consensual, such as a real estate loan, statutory, such as property taxes, infrastructure bond assessments, or based upon court order. A judgment lien is the most dangerous because a judge can order a recording of a lien on one’ s property, whether for rightful reasons or subject to objection.
8) Statutory skipping power in front of other liens:
California law regards lien priority as " firstintime, firstinright." First in time refers to recording with a precise date and timestamped number. California laws also allow exceptions for some types of liens whereby certain liens are given " skipping power " to the front of the line regardless of recording time.
Front of the line means giving priority lien position preference over other recorded liens and encumbrances.
Government regulations permit certain liens to be advanced, so they become the senior priority to other liens. Mechanic ' s liens, meant to ensure that tradesmen and contractors are paid promptly, exemplify a priority lien with " skipping power." The California Constitution protects this right and is further enumerated in the California Civil Code( Section 3110 et seq.).
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