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
74