Foreclosure decisions often involve an evaluation of the priority of the lender's mortgage. Investors interested in acquisition of distressed properties will typically need to make sense of a number of recorded encumbrances to determine whether the property has any value. Ranking mortgages against other recorded liens in Louisiana requires a closer look at La. R.S. 9:4821 et seq. After many years of helping lenders and investors make sense of complicated abstracts, I have summarized the ranking rules, as follows:
1. Ad Valorem Tax Lien/local assessments for public improvements against the property; liens and privileges granted in favor of parishes and municipalities for reasonable charges imposed on the property. First in rank and concurrent regardless of recordation date. *Please note: certain statutes creating these liens conflict with the ranking rules laid out in 9:4281(A)(1)
- Cost of removing grass and obnoxious weeds incurred by a Parish.
- Cost of removal of grass, obnoxious weeds, or other deleterious or unhealthful growths, trash, debris, refuse, or discarded or noxious matter incurred by a parish
- Cost of removal of trash, debris, junk, wrecked or used automobiles, or motor vehicles, or any part or parts thereof, or any other junk, discarded or abandoned machinery or other metal, tin, or other discarded items, on any vacant lot, or any portion of any unoccupied lot, neutral ground or sidewalk, within recognized subdivisions within a parish
- Cost of removal/repair of buildings, dwellings, and other structures that have become derelict and present a danger to the health and welfare of the residents of a parish
- Cost of filling or draining of property to prevent ponding of water, breeding of mosquitoes, or other nuisances in a parish
- Amount of any unpaid service charge or user fee for sewage disposal services of any sewage district located within a Parish
- Cost of demolition, removal, or both of such structures which by reason of their nature or condition, endangers the public welfare or safety in the cities of New Orleans and Shreveport
- Cost of the cutting, destruction, or removal of noxious weeds or grass or other deleterious, unhealthful or noxious growths on any sidewalks or banquettes and on any lot, place, or area within a municipality
- Costs for extraordinary police, fire, sanitation, and health services provided to the owners of vacant substandard buildings deemed uninhabitable by the municipality
- Cost for the removal of grass, noxious weeds, or other deleterious or unhealthful growths in the city of Plaquemine
- Cost for removal and securing dangerous structures
- Cost of maintenance of an immovable or improvements by a parish or municipality
- Cost of demolishing or removing, or both, a building or other structure situated upon the immovable or improvements, and all attorney fees incurred by the parish or municipality in connection with such demolition or removal
- Civil fines charged by a municipality or parish for blighted property, abandoned property, or violation of public health, housing, fire code, environmental, and historic district ordinances in the municipality or parish
2. Mechanic's/ Laborers/Employees Liens under the Louisiana Private Works Act (“LPWA”). These liens rank equally among each other, but will always come behind Parish taxes and blight liens. If filed prior in time to a Federal Tax Lien, they will even prime IRS liens.
- Price of work performed at the site of an immovable by laborers or employees of a contractor or a subcontractor
3. Federal Tax Liens are "First in Time, First in Right," and include all neglected federal taxes plus interest in favor of the federal government. But the feds won't prime local taxes, assessment or properly filed and preserved mechanic's lien.
4. Bona Fide Mortgages or Vendor's Privileges rank equally among each other.
5. Seller's/Lessor's/Subcontractor's LPWA Liens. Seller's lien for the price of movables sold to the owner of an immovable when: 1) the movable becomes a component part of the movable; 2) the movable is consumed at the site of the immovable; or 3) the movable is consumed in machinery or equipment used at the site of the immovable
- Lessor's Lien for the rent of movables used at the site of the immovable and leased to the owner by written contract
- Subcontractor's Lien for the price of their work
- Seller's Lien for the price of movables sold to a contractor or subcontractor (when: 1) the movable becomes a component part of the movable; 2) the movable is consumed at the site of the immovable; or 3) the movable is consumed in machinery or equipment used at the site of the immovable)
- Lessor's Lien for the rent of movables used at the site of the immovable and leased to the contractor or subcontractor written contract
6. Contractor/Professionals LPWA Liens rank equally among each other.
- “Professional's Lien” for the price of professional services rendered in connection with a work undertaken by the owner of an immovable