Junior Lien
A lien that has lower priority than a senior lien, meaning it is paid after higher-priority liens are satisfied in the event of a property sale or foreclosure.
A junior lien is any lien on a property that has a lower priority than another lien (the "senior" lien). Lien priority determines the order in which debts are paid when a property is sold or foreclosed upon. Junior liens are paid only after all senior liens have been fully satisfied, which means there may not be enough proceeds to cover junior lien holders.
In most jurisdictions, property tax liens hold the highest priority — they are senior to all other liens including first mortgages. This is one of the fundamental reasons tax lien investing is considered relatively secure. When a tax lien investor purchases a certificate, they are acquiring a first-priority claim against the property. Any mortgages, judgment liens, or other encumbrances become junior to the tax lien.
Understanding lien priority is crucial for tax deed investors as well. When a property is sold at a tax deed sale, many junior liens are extinguished — meaning the new owner receives the property free and clear of most previous encumbrances. However, certain government liens (such as federal tax liens or some environmental liens) may survive the tax sale, so careful title research is essential.
The concept of junior liens also comes into play when evaluating whether a tax lien is likely to be redeemed. Properties with significant mortgage debt are more likely to be redeemed because the mortgage lender has a strong incentive to protect their investment by paying off the tax lien. This knowledge helps investors predict redemption likelihood and plan their investment strategy accordingly.