⚡ 10-Second Rule
When several lenders claim one property, the earliest usually wins — unless recording rules or a purchase loan reshuffle the line.
🧒 ELI-10 Scene
The school bake sale runs on numbered tickets. First ticket pulled, first served — simple. But there are twists. Priya took ticket 3 and never wrote her name on the board. Marco arrived later, checked the board, saw nothing, and signed up properly. Marco now serves before Priya. Then there's Dev, who actually paid for the oven that baked everything. Dev eats first, ahead of everyone, no matter his ticket number. Two kids can also swap places if both agree — that's their business. And if ticket-holder 1 suddenly triples his order after others lined up behind him, the extra helpings go to the back of his line.
⚖️ Actual Rule
The baseline rule for competing liens is first in time, first in right. Recording acts modify that baseline: a subsequent mortgagee who gives value without notice of a prior unrecorded mortgage (and, in a race-notice state, records first) takes priority over it, because mortgagees are protected purchasers under the recording acts. A purchase-money mortgage — one securing a loan that funds the acquisition of the property itself — has priority over earlier-arising claims against the purchaser, such as previously docketed judgment liens or after-acquired-property clauses, provided it is properly recorded; the Restatement endorses this super-priority, and as between competing purchase-money lenders, gives the seller's purchase-money mortgage priority over a third-party lender's. Restatement (Third) of Property: Mortgages § 7.2 (paraphrased). Lienholders may rearrange the line by a subordination agreement, which courts enforce. For mortgages securing future advances, the majority rule distinguishes obligatory from optional advances: obligatory advances carry the original mortgage's priority, but optional advances made after the lender has notice of an intervening junior lien are subordinate to that lien; the Restatement would instead give all future advances the original priority. Restatement (Third) of Property: Mortgages § 2.3 (paraphrased). Finally, if a senior mortgagee materially modifies the loan to the mortgagor's detriment — for example, by increasing the principal or the interest rate — the senior loses priority to junior lienholders, but only to the extent of the prejudicial modification; the original terms keep their original rank. Restatement (Third) of Property: Mortgages § 7.3 (paraphrased).
ELI-10 translation: earliest claim wins, but hidden claims can be jumped, the loan that bought the land goes first, and a senior who worsens the deal drops back only for the worsened part.
🔍 Ask These Questions
- What is the order of claims first in time? (Line everyone up by the date their claim was born.)
- Does a recording act bump anyone — value given, no notice, recorded per the statute? (Did a later lender check the public board, see nothing, and sign up properly?)
- Is any lien a purchase-money mortgage? (Did that loan actually buy the land? Then it cuts to the front against the buyer's old creditors.)
- Is there a subordination agreement? (Did two claimants agree to swap places? Courts honor the swap.)
- Are there future advances, and were they obligatory or optional with notice? (Promised money keeps its old spot; extra optional money after learning of a newcomer goes behind the newcomer.)
- Did the senior modify the loan after juniors appeared? (Only the harmful new part drops in rank; the original loan holds its place.)
⚠️ Bar Trap
Exam language: Examiners docket a judgment lien against the debtor before he buys the property, note that the lien attaches to after-acquired real property, and invite you to rank it ahead of the purchase-money mortgage recorded at closing. It loses: a properly recorded purchase-money mortgage takes priority over prior claims arising against the mortgagor, because the debtor acquires the land already encumbered by the loan that bought it.
ELI-10: The loan that paid for the land wins against the buyer's older debts. The buyer never owned the land for even a second without that loan attached.
🧪 Question
A contractor obtained a $100,000 judgment against a carpenter and properly docketed it in the county where the carpenter lived. Under state law, a docketed judgment becomes a lien on all real property the judgment debtor owns or later acquires in the county. Two years later, the carpenter purchased a workshop in the county for $250,000, borrowing $200,000 of the price from a credit union, which took a mortgage on the workshop to secure the loan and recorded it at the closing. The carpenter has defaulted on all obligations, and the workshop is worth less than the combined claims. The contractor and the credit union each claim first priority in the workshop.
Who has first priority?
(A) The contractor, because its judgment lien arose and was docketed before the credit union's mortgage was created. (B) The contractor, because the judgment lien attached to the workshop at the instant the carpenter acquired title. (C) The credit union, because a recorded purchase-money mortgage has priority over earlier claims arising against the purchaser. (D) The credit union, but only if it lacked actual knowledge of the contractor's docketed judgment.
Answer: (C). The credit union's loan funded the very acquisition of the workshop and was recorded at closing, so its purchase-money mortgage outranks the earlier judgment lien. The carpenter took title already burdened by the mortgage that made the purchase possible.
💡 Why the Wrong Answers Are Wrong
- (A) applies the first-in-time baseline while missing the purchase-money exception that displaces it here.
- (B) describes the attachment mechanics correctly but draws the wrong conclusion; the title the lien attaches to is already subject to the purchase-money mortgage.
- (D) invents a notice requirement; purchase-money priority over the mortgagor's prior creditors does not depend on the lender's ignorance of them.
- ELI-10: The misconception is thinking older always beats newer. The loan that bought the land beats the buyer's older debts every time.
