Important Change in the Lien Priority of Certain Mortgages and Deeds of Trust on Washington Real Estate
Mortgages and deeds of trust often secure loans that provide for one or more advances by the lender. Depending upon the loan involved, the lender may be obligated to make the advance or the lender may have the discretion to make the advance. Typically, a mortgage or deed of trust has priority over most other liens and encumbrances from the time it is recorded in the real property records of the county in which the real property is located.
However, for many years, the priority as to a particular loan advance has been determined by the nature of the advance. If the lender was obligated to make the advance, the priority of the advance as against other encumbrances was the date the mortgage or deed of trust was recorded. If the lender had discretion whether to make the advance, the priority of the advance was tied to the date on which the advance was made. As a result, some of the lender’s advances could have priority over all subsequent encumbrances and some of the lender’s advances could be subject to some of the encumbrances that attached to the real property after the mortgage or deed of trust was recorded.
Earlier this year, the state of Washington enacted a law providing that, except as provided in the statutes dealing with mechanics’ and materialmens’ liens, any mortgage or deed of trust has priority over “all liens, mortgages, deeds of trust, and other encumbrances that have not been recorded before the recording of the mortgage or deed of trust to the extent of all sums secured by the mortgage or deed of trust regardless of when the same are disbursed or whether the disbursements are obligatory.” The law is effective July 23, 2023. As a result, whether the advance is obligatory or discretionary is no longer relevant to determining its priority in most instances.
If you need assistance with these issues, contact Per Oscarsson or one of the other attorneys in Beresford Booth’s Business and Real Estate Group.
To learn more about Important Change in the Lien Priority of Certain Mortgages and Deeds of Trust on Washington Real Estate, please contact Beresford Booth at firstname.lastname@example.org or by phone at (425) 776-4100.