Question

In relation to lien priority, which of the following statements is INCORRECT?

1) A lien with higher priority takes precedence over a lien with lower priority.
2) A lien with lower priority takes precedence over a lien with higher priority.
3) Lien priority is determined based on the order in which liens are recorded.
4) Lien priority is determined based on the amount of the lien.

Answer 1

The incorrect statement about lien priority is that a lien with lower priority would take precedence over one with higher priority. Lien priority is usually determined by the recording order, not by the amount of the lien.

Step-by-step explanation:

In relation to lien priority, the incorrect statement is that 'a lien with lower priority takes precedence over a lien with higher priority'. The correct principles of lien priority are as follows:

1. A lien with higher priority takes precedence over a lien with lower priority.
2. Lien priority is generally determined by the 'first in time, first in right' rule, which means that lien priority is usually established based on the order in which liens are recorded.
3. The amount of the lien does not typically determine lien priority; rather, it is the order of recording and the nature of the lien that are the determining factors.

Therefore, the statement that a lien with higher priority takes precedence is correct, reinforcing the fact that lien priority is not based on the amount of the lien.