What Liens Attach to Property Sold Under a Second Mortgage?
Full Question:
Answer:
A property owner generally is liable for any property taxes due and the property is subject to a tax lien if not paid on time. A lien may also be placed on the property for overdue HOA fees. Any contractual obligations, such as mortgage payments, or a contractual obligation to insure the property (often required in a mortgage), will continue to exist until the terms of the contract are changed or voided. Failure to make payments due to creditors may result in foreclosure. Florida allows the lender to get a deficiency judgment against the debtor is the property sells for less than the amount owed by the debtor. Foreclosure and court judgments will show up on your credit report. A foreclosure is one of the most credit-damaging events that can ever appear in your credit history and will stay on your credit report for at least seven years.
Priority of liens is generally determined by the date of recording. Often, the the mortgage holder will have priority over any later filed liens (junior creditors), and the liens junior creditors hold will only be able to be collected out of any remaining proceeds after the mortgage holder is paid. If the property securing the mortgage is sold in foreclosure and no proceeds remain to pay junior creditors, it is possible the junior creditors could attach other assets of a judgment debtor.
Under some circumstances, a lien must be "refiled." To remove any uncertainty about whether a lien is still enforceable when the notice shows the assessment is more than ten years old, the IRS is required to refile its notice of tax lien within a one year period ending ten years and 30 days after the date of the assessment. Failure to refile at the appropriate time does not affect the validity of the lien, but it does nullify the legal effect of the prior filing. In the case of a late refiling, any security interest arising after the prior filing but before the refiling obtains a priority to the same extent as if no notice of tax lien had been filed prior to the time of the late refiling.
In some cases, a federal tax lien can be made secondary to another lien. That process is called subordination. Refer to Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien.
For further discussion, please see:
http://www.irs.gov/businesses/small/article/0,,id=108339,00.html#Notice
http://www.irs.gov/businesses/small/article/0,,id=108339,00.html#second
http://irstaxattorney.com/liens/part5-liens/continued/6323-Florida2.html
