National Real Estate Exam (PSI)Property OwnershipHard
A property owner fails to pay both their annual property taxes and their mortgage payment, and both liens go unpaid for an extended period. If the property is foreclosed and sold, which lien is generally paid first from the sale proceeds?
- AWhichever lienholder files suit first in court
- BThe liens are paid in equal proportion regardless of type
- CThe mortgage lien, because it was recorded first
- DThe property tax lien, because tax liens typically have superpriority over other liens
Show answer & explanationAnswer & explanation
Correct answer: D. The property tax lien, because tax liens typically have superpriority over other liens
Property tax liens generally hold superpriority status, meaning they are paid first from foreclosure sale proceeds regardless of when other liens, like a mortgage, were recorded, because governments require tax revenue to be protected ahead of private claims.
Why the other options are wrong
- A. Lien priority is determined by law/recording rules, not by who files suit first.
- B. Liens are paid according to priority order, not equally.
- C. Recording date determines priority among most liens, but tax liens are a well-known exception with superpriority.
Lien Priority & Tax Superpriority
Generally, liens are paid in order of recording date ('first in time, first in right'), but property tax liens have superpriority and are paid first regardless of recording date.
- General rule: earlier recorded lien has higher priority
- Exception: property tax liens have automatic superpriority
- Mechanic's liens sometimes relate back to the start of work in some states
Memory trick: Uncle Sam always eats first at the foreclosure table.