If you own property in Ohio, you might assume that liens work on a simple “first come, first served” basis. After all, common sense suggests that the first person to place a claim on your property should have the first right to payment.
But what if we told you that in several important situations, a newer lien can actually jump ahead of older ones?
This legal reality surprises many property owners, and it’s something you need to understand if you’re dealing with multiple liens or facing foreclosure in Ohio.
The General Rule: “First in Time, First in Right”
In Ohio, lien priority typically follows the “first in time, first in right” principle. This means that liens are generally prioritized based on their recording date with the county recorder’s office.
The first lienholder to record gets first priority, the second gets second priority, and so on down the line.
But this general rule comes with significant exceptions that can dramatically change who gets paid first when property is sold in foreclosure or other proceedings.
When Newer Liens Jump the Line in Ohio
Here are the key situations where a newer lien can take priority over an older one in Ohio:
1. Property Tax Liens: The Ultimate Priority
Property tax liens represent the clearest example of newer liens taking priority over older ones.
Even if your mortgage was recorded years ago, when you fail to pay property taxes, the resulting tax lien jumps to the front of the line. These “super-priority” liens get paid first in a foreclosure or property sale, regardless of when they were created.
Why this matters: If you’re struggling financially, paying property taxes should remain a top priority. Even if you’re behind on mortgage payments, keeping property taxes current can prevent a tax lien from complicating your situation further.
2. Mechanics’ Liens: Protection for Contractors
Under Ohio Revised Code Section 1311.13, properly filed mechanics’ liens can gain priority over previously recorded liens in certain circumstances.
If a contractor begins work on your property, their mechanics’ lien can take priority over any mortgage recorded after the date construction began, even if the lien itself wasn’t filed until later.
Example: John took out a home equity loan in June. In May, before the loan, a contractor began a major renovation project on John’s house. When the contractor filed a mechanics’ lien in August due to non-payment, that lien took priority over the June home equity loan, despite being recorded later.
3. HOA “Super-Priority” Liens
In some cases, homeowners association (HOA) liens can gain limited priority over previously recorded first mortgages.
While Ohio doesn’t have a specific “super-priority” statute for HOA liens like some states do, many HOA declarations contain provisions that can create priority for certain assessments.
What property owners should know: Read your HOA documents carefully. Some declarations create automatic liens for unpaid assessments that can complicate priority disputes.
4. Future Advance Mortgages
When a mortgage secures future advances (like a home equity line of credit), each advance typically takes priority as of the original mortgage recording date, even though the money was lent much later.
This means funds advanced years after the original mortgage can still maintain priority over liens recorded in the interim.
The fine print: This protection typically requires specific language in the mortgage document and compliance with statutory requirements.
5. Purchase Money Mortgages
A purchase money mortgage, one that helps you buy the property, generally gets priority over other liens that might attach to the property through the borrower at the time of purchase.
This special status protects lenders who finance property purchases.
6. Federal Tax Liens with Special Status
While most federal tax liens follow normal priority rules, in certain cases involving estate tax liens or special assessments, federal tax claims can receive enhanced priority that may allow them to leap ahead of previously recorded liens.
The Impact of Subordination Agreements
Beyond these statutory exceptions, liens can also change position through subordination agreements.
These voluntary agreements allow a senior lienholder to agree to take a junior position behind another lien. This frequently happens in refinancing situations, where a new lender will only provide funding if they can obtain first-lien position.
What This Means for Ohio Property Owners
The exceptions to “first in time, first in right” create both risks and opportunities:
- For property owners: Understanding these exceptions helps you make informed decisions about which debts to prioritize if you’re facing financial challenges.
- For potential lienholders: Knowing when your lien might have enhanced priority can strengthen your negotiating position.
- For property buyers: Being aware of potential priority disputes helps you conduct more thorough due diligence before purchasing.
Legal Guidance Makes All the Difference
Lien priority disputes often involve highly technical legal arguments. The outcome can mean the difference between recovering your full claim and getting nothing.
At Cavell Law, we regularly help clients handle lien priority issues. With experience in real estate litigation throughout Ohio, our attorney provides strategic counsel to:
- Property owners dealing with multiple liens
- Lenders concerned about their lien position
- Contractors seeking to establish priority for their mechanics’ liens
- Parties involved in foreclosure proceedings with competing lien claims
If you’re facing a situation involving competing liens in Ohio, don’t assume that recording dates alone will determine who gets paid first. The specific circumstances, nature of the liens, and technical compliance with statutory requirements can dramatically alter the outcome.
For personalized guidance on your specific situation, contact Cavell Law in Highland Heights, Ohio.
