Legal Question in Real Estate Law in California
Lien Priority - 1st Mortgage vs IRS Fed Tax Lien
The Trustee Sale is requested by the 1st mortgage lender. The Deed of Trust was recorded on 2/19/2002 but the trustor/borrower's last name was spelled wrong. The Deed of Trust was then sold/assigned to a new lender in 2003. The Assignment of Trust Deed actually shows the correct last name of borrower. In 2004, IRS recorded a Fed Tax Lien on the property because the borrower/taxpayer owes 1040 tax for the year of 1997 (assessment date is 3/29/2004).
My questions are:
The 1st Deed of Trust wasn't recorded perfectly. But the succeeding Assignment of Trust Deed was recorded correctly. Is the 1st Deed of Trust still senior than the IRS Fed Tax Lien?
Assuming the 1st Deed of Trust keeps its seniority. Does its trustee sale wipe out the IRS Fed Tax Lien?
Assuming the 1st Deed of Trust lost its seniority (become junior to IRS Fed Tax Lien). Does that make the winning bidder on the 1st Deed of Trust be responsible for paying the IRS Fed Tax Lien ?
Is the IRS Fed Tax Lien priority solely determined by its Recording date? Will the Tax Year or Assessment Date affect its priority?
2 Answers from Attorneys
Re: Lien Priority - 1st Mortgage vs IRS Fed Tax Lien
In order -
Yes.
It wipes out the lien but not the debt.
Recording date.
Re: Lien Priority - 1st Mortgage vs IRS Fed Tax Lien
The erroneous spelling of the name does not invalidate the deed of trust, and it is still senior to the tax lien. The effective date of the tax lien is the date it was recorded. If the lender forecloses, it will extinguish the LIEN from the IRS, but the money will still be owed and can be collected from other sources or assets in future.
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