A first lien is a legal claim against a property that takes precedence over all other claims or encumbrances on that property. This means that if a property is sold or foreclosed, the first lien holder is paid before any other creditors. It is important to note that first liens do not necessarily have priority over government-imposed claims, such as tax liens.
First liens are commonly used in various legal contexts, particularly in real estate and finance. They are essential in securing loans, where the lender holds the first lien on the property as collateral. This term is relevant in:
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Here are a couple of examples of abatement:
Example 1: A homeowner takes out a mortgage to purchase a house. The bank holds a first lien on the property, meaning if the homeowner defaults, the bank has the first right to recover its loan amount through the sale of the house.
Example 2: A business secures a loan using its commercial property as collateral. The lender places a first lien on the property to ensure repayment in case of default. (hypothetical example)
Examples of state differences (not exhaustive):
| State | First Lien Regulations |
|---|---|
| California | First liens must be recorded to be enforceable. |
| Texas | Homestead exemptions may affect the priority of liens. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Second lien | A claim that is subordinate to the first lien. | Second liens are paid after first liens in case of liquidation. |
| Tax lien | A claim imposed by the government for unpaid taxes. | Tax liens can take priority over first liens in certain circumstances. |
If you are dealing with a first lien, consider the following steps:
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| Attribute | Details |
|---|---|
| Priority | First in line for repayment |
| Common Use | Securing loans for real estate |
| Legal Assistance | Consult a lawyer for complex situations |
A first lien has priority over all other liens, while a second lien is subordinate and paid only after the first lien is settled.