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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