CHAPTER 7.01. General

• Jurisdiction: United States

7.01. General

The priority of a mortgage lien generally dates from the time of recording of the mortgage, regardless of when the mortgage was executed or delivered.¹ Because the time of recording determines relative lien priorities, first in time means first in right.² If two or more mortgages encumbering the same property are filed in the recorder of deeds office at the same time, the one dated earliest in time has priority.³

However, there are a few exceptions to this rule for the relative priority of a mortgage lien. A mortgage from the purchaser of real property to the seller made for securing any portion of the purchase money for the sale of that property is referred to in Delaware as a purchase money mortgage and has special treatment for lien pri-ority.⁴ In addition, the priority of the mortgage lien can be affected by liens that arise after the mortgage has been recorded but that, by statute, have priority over the mortgage lien already in existence. There are generally three categories of these sorts of liens in Delaware: mechanic's liens, governmental liens, and association assessment liens.

[1] Special Lien Priority—Mechanic's Liens

A person who supplies labor or materials to improve land with a structure is entitled to a lien for the value of the work done, which is usually established by the amount due under the contract.⁵ Persons entitled to these liens include, among others, contractors, subcontractors, suppliers, and architects. It is worth noting that demolition by itself is not lienable, nor are site work activities, such as grading, lienable by themselves.⁶ The priority of the lien is based on when the relevant work commenced. If a lender obtains a mortgage on real estate after the work has commenced, the lien of that mortgage may be junior to the lien of the contractor, even if the person entitled to that lien has not filed any notice of that lien with the court or other public record. This is a so-called inchoate mechanic's lien. The exception to this result is for certain mortgage liens securing construction loans, where 50 percent or more of the loan proceeds go to pay the cost of the work on the property that is the subject of the potential mechanic's liens.⁷

[2] Special Lien Priority—Governmental Liens

Under Delaware law, the state or one of its political subdivisions (for example, a county or a municipality) has the benefit of lien status for certain assessments imposed by that governmental entity, such as those for property...