The Missouri Supreme Court issued an opinion yesterday weighing in on a battle between a builder’s mechanics lien and a lender’s unrecorded deed of trust.
The lender argued that the unrecorded deed of trust would have priority over a mechanics lien claim because the deed of trust need not meet the same recording requirements as a mortgage. The Missouri Supreme Court, however, disagreed, giving the builders a victory over Hawthorn Bank.
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In the case Bob DeGeorge Associates, Inc. et al v. Hawthorn Bank, the Missouri Supreme Court explained the rule of mechanics lien priority in the state as follows:
Unlike recording an instrument under the recording statutes, filing a mechanic’s lien is irrelevant for the purpose of determining first-in-time priority between competing encumbrances on real property…So long as a mechanic’s lien arises on the land and is filed properly, it will have priority over any third-party encumbrance attaching after the date work began.
It was clear that the deed of trust wasn’t recorded until after work commenced. So, what’s the big deal? Why did this matter get all the way up to the Supreme Court?
Hawthorn Bank argued that its lien against the land was entitled to priority over the mechanics lien because it had a special “purchase-money deed of trust.” Citing some case law that I won’t go into it argued that purchase money deeds of trust are always superior to mechanics lien claims, regardless of the deed of trust’s recording date.
The Supreme Court distinguished all of the raised precedent and made the law crystal clear in Missouri: purchase money deeds of trust do not get special treatment. To have priority over a mechanics lien claim it must be recorded before the lien attaches, which is when work first commences at the project.