However , there are limits on the " skipping power " of mechanics liens . These relate to technical requirements , such as when the construction began and the claimant ' s process to enforce that lien . Even when the mechanic ' s lien appears to have been " wiped out or extinguished " by a senior lienholder at a foreclosure sale , the lien is not automatically expunged . For more specific requirements for mechanic ' s liens , the lender should consult counsel knowledgeable about construction and mechanics lien law .
Other exceptions relating to " skipping power " may include property taxes , special tax assessment districts , and , in some states , homeowners or mutual property associations .
A written lease agreement has a " firstintime , firstinright " priority . Lessees ( tenants ) who have written lease agreements recorded at the county recorder ’ s office that are date and timestamped before recording the new trust deed will have a right to enforce the terms of the lease agreement and right of continued occupancy . The lessee ’ s rights will run with the property until the lease terms ( rights ) expire or are modified in writing by mutual agreement . Below is an instructive example .
https :// law . justia . com / cases / california / co urtofappeal / 4th / 65 / 1469 . html
9 ) Lien priority may be modified through written agreements :
There are many reasons to create written agreements that modify the lien priority by mutual understanding . One method is called a subordination agreement . This agreement makes the subject lien junior to another lien even though it was recorded earlier with an earlier date stamp .
A real estate lender may condition the approval of a loan upon a written modification of the statutory priority . A written agreement between the borrower , the tenant , and the lender may be required for approval and loan closing . A straight subordination agreement or a subordination , nondisturbance , and attornment agreement ( SNDA ) may be advised . Both agreements , when recorded , are encumbrances on the property .
Sometimes , it is in the lender ' s best interest to terminate the tenancy in case of borrower default and completion of a foreclosure procedure . In this case , a straight subordination signed by the tenant would be appropriate . Any action causing a change in the chain of title may cause the lessee ’ s priority to be lost . If the lessee ’ s priority is lost , he could be notified to vacate and be kicked out of the property .
In some commercial transactions , the lender may wish to preserve the tenancy of credit tenants to preserve the property ' s cash flow , stabilized occupancy , and capitalized value . A subordination , nondisturbance , and attornment agreement " SNDA " may be the appropriate document to record . SNDAs are agreements between a lessee ( tenant ), the lessor ( landlord ), and the lender . The SNDA defines certain rights and responsibilities of the parties . The SNDA will protect the lessee or tenant from being evicted if the owner ( landlord ) stops paying the loan payments to the lender ( s ), resulting in a completed foreclosure . Other parties may be affected , such as a purchaser of the property .
https :// www . jdsupra . com / legalnews / snda whatisitandwhyisit important 97709 /
10 ) Modifying the rights and responsibilities of senior and junior lien parties :
An intercreditor agreement may be advised . This agreement does not modify the lien positions between junior and senior lender creditors .
An intercreditor is a written agreement between two creditors intended to memorialize how their competing security interests will be handled when each possesses liens ( a claim or money charging interest ) in a joint borrower and secured property . This agreement is used between two ( or more ) senior / junior lenders to establish rights and responsibilities between each lender . The agreement typically provides that one lender ’ s lien is senior to the other regardless of when and in which order the liens were recorded .
Sometimes , the actual agreement is a “ subordination and intercreditor agreement .” This document allows two different lenders to “ split up ” the collateral so that both will be secured in an equal first or junior lien position for their collateral , subject to the terms and conditions of the agreement .
The intercreditor agreements , when recorded , are an encumbrance against the property .
If you find value in this article for you and your associates , please forward it to others who may appreciate the education . I am sure that the reader realizes the importance of competent legal counsel .
Thank you ,
Dan Harkey
Educator & Private Money Finance Consultant dan @ danharkey . com
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