What Does It Mean to Perfect a Lien?

Having a perfected lien means that a creditor, such as a mortgage lender, has established its lien’s priority.

By , Attorney University of Denver Sturm College of Law
Updated 6/30/2025

When you take out a loan to buy a home, the lender will get a lien on the property when you sign the mortgage. The lien secures the loan (that is, it makes the property collateral for the debt). But what many borrowers don't realize is that the lender must take additional steps to "perfect" the lien. Lien perfection is the process of legally establishing a lender's priority. Having a perfected lien ensures that the lender's lien takes precedence over the claims of other creditors and future buyers.

To perfect its lien, the lender must record the lien with the relevant public records office, such as the county recorder's office. Having a perfected lien grants a creditor legal rights and protections, such as the right to get first crack at the foreclosure proceeds if a borrower doesn't make their mortgage payments. Without a perfected lien, the lender could still foreclose, but it might find itself at the back of the line when it comes to foreclosure sale proceeds or, even worse, unsecured.

While perfecting a lien might sound like a mere technicality that only affects the lender, whether a lien is perfected or not can have implications for homeowners facing foreclosure.

How Mortgage Loans and Liens Work

When buying residential real estate, most people sign two documents: a promissory note (a mortgage note), and a mortgage or deed of trust. The note contains your promise to repay the money you borrowed. Depending on where you live, you will also sign either a mortgage or a deed of trust (collectively referred to as a "mortgage" in this article). The "mortgage" is the document that pledges the parcel of property as security for the debt and creates a lien on the property.

The lender must perfect this lien to protect its position against other property liens in the case of a foreclosure. Perfecting the lien establishes the mortgage lender's priority.

How Lien Priority Works

"Lien priority" determines the order (first position, second position, and so on) in which creditors get paid, say, after a foreclosure sale. If a lien has priority over another lien, it gets paid before the other lien.

To get priority, a lien must be perfected. Having a perfected lien ensures the lender is ahead of subsequent lienholders and unsecured creditors.

How to Perfect a Lien

Perfecting a lien involves taking the necessary legal steps to ensure the lien is valid and enforceable against others. Some common examples of perfected liens include mortgages, mechanic's liens, tax liens, and judgment liens.

How Does Lien Perfection Happen for Mortgages?

Again, to establish the right to foreclose and protect its position against other property liens (for example, other mortgages, judgment liens, and IRS liens), the lender must take steps to "perfect" the property lien.

Before the lien can be perfected, the security instrument (the mortgage) must be properly executed (signed by the borrower). Then, to perfect the lien, the lender must record or file the mortgage with the appropriate legal authority. Usually, the mortgage is recorded in the land records in the county where the property is located. The lender must pay a recording fee and make sure that the document is legible and meets the recording requirements of the county.

Based on the legal rule known as "first in time, first in right," liens generally have priority in the order that they're recorded in the land records office. However, as with most legal rules, some exceptions to the "first in time, first in right" rule are in place. Depending on state law, certain liens such as property tax liens, mechanic's liens, and homeowners' association and condominium association assessment liens get priority over previously recorded liens.

Perfected Lien vs. Unperfected Lien

In the case of a mortgage lien, the lender gets a lien when the borrower signs the mortgage or deed of trust. The lien becomes perfected when the lender records the mortgage or deed of trust in the land records, usually with the county.

Without a perfected lien, the lender's lien is likely still valid between the lender and the borrower, but it isn't legally recognized by other parties. This distinction becomes really important if the borrower defaults and the lender has to foreclose, particularly when there are multiple liens on the property.

The purpose behind the recording requirement is twofold:

  • It serves as a public declaration of the lender's lien against the real estate. Recording the document gives other parties, such as potential purchasers and other lenders, notice of the lien.
  • Once a lender perfects its lien by recording the mortgage, it establishes the lien's priority relative to other liens or encumbrances on the property.

Without a perfected lien, the lender might lose their secured status, lose their priority to other lienholders, or have trouble enforcing the lien through a foreclosure. Perfecting the lien is necessary to create an enforceable right.

Why Does Lien Perfection Matter to You as a Borrower?

If you're facing a foreclosure, lien perfection affects how and whether the lender can enforce its rights. A perfected lien ensures that the lender is in a good position to foreclose if you stop making mortgage payments and will likely recoup the money it lent you by selling the property at a foreclosure auction.

However, if the lien isn't perfected, the lender might have fewer options and might even lose the opportunity to foreclose. For example, the lender's claim might not be enforceable in court. So, the lender might not be able to proceed until it corrects the defect. Or the lender might not be able to foreclose using a nonjudicial process (quicker and easier than going through court) and, instead, have to file a court action to foreclose your home. This means the foreclosure process could be delayed or more complicated, allowing you to stay in the property longer than in a straightforward foreclosure.

When It Might Be Helpful to Talk to a Lawyer

If you're facing a foreclosure and want to learn more about lien priority or any other issue related to foreclosure, consider talking to a foreclosure attorney.

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