CA Franchise Tax Liens


#1

My understanding is that CA Franchise Tax Liens do not have priority like a Federal Tax Lien. Is this correct? My understand is that the CA Franchise Tax Liens(s) would be paid in accordance to the recording date of the lien. Is that correct?

There are 2 loans on this property. The lender is the same for both 1st and 2nd.

1st Deed of Trust $333,000 recorded on 5/12/04
2nd Equity Line $300,000 recorded on 5/7/04

Lender recorded error in the recordation of the Equity Line prior to the 1st, using a Subordination Agreement recorded 3/21/11

CA Franchise Tax Board 255,000 6/7/11 CA Franchise Tax Board 22,100 3/17/10
CA Franchise Tax Board $45,200 10/15/10

Abstract Civil Judgement $51,500 11/13/09

Will the Subordination recording date have any impact on the seniority of the 1st and Equity line as it relates to the CA Franchise Tax Board liens and or the Abstract Civil Judgement? My assumption is that the 1st Deed of Trust will be the priority lien over all other liens of record. Is this correct Sean?
Thank you.


#2

Hi Paul,
All liens are “first in time is first in line”. This applies to the State Franchise Tax Board and IRS liens. The only difference with an IRS lien is that the IRS has a 120 day redemption period.

In most cased an institutional lender will not fund a loan in an inferior position to a tax lien. It would be a requirement of the funding conditions that these liens are released or subordinated to their Deed of Trust. That said, mistakes can be made and title mistakes can be costly for investors that are not covered by the lenders title policy.


#3

Hi Michelle,

Thanks for your reply. I will remember the first in time, first in line adage. Interesting note on the 120 day redemption period for the IRS. I understand that some people hold on off on recording their Deed for 120 days post purchase if there are IRS liens. Holding off on recording would open up other exposure risks in my mind.

Just to clarify. My understanding is that the Subordination date will in no way affect the original recording dates of the 1st and 2nd although corrected via the subordination. The 1st DOT recorded on 5/12/04, is foreclosing. However the Subordination was not recorded until 3/21/11. The Equity Line recorded on 5/7/04 is now in 2nd position.


#4

Let me re-state my comment and question more clearly on CA Franchise Tax Liens and Subordination priority:

My understanding is that CA Franchise Tax Liens do not have priority like a Federal Tax Lien. Is this correct? My understand is that the CA Franchise Tax Liens(s) would be paid in accordance?to the recording date of the lien. Is that correct?

There are 2 loans on this property. The lender is the same for both 1st and 2nd.

1st Deed of Trust $333,000 recorded on 5/12/04

2nd Equity Line $300,000 recorded on 5/7/04 making it senior to the larger $333K DOT albeit a later recordation of a subordination agreement now apparently places this smaller $300K equity line in a junior position to the larger loan.

A Notice of Trustee Sale has been recorded on the larger, now apparently senior $333K DOT.

Lender recorded error in the recordation of the Equity Line prior to the 1st, using a Subordination Agreement recorded 3/21/11

CA Franchise Tax Board 255,000 6/7/11 CA Franchise Tax Board 22,100 3/17/10
CA Franchise Tax Board $45,200 10/15/10
Abstract Civil Judgement $51,500 11/13/09

Will the Subordination recording date have any impact on the seniority of the 1st and Equity line as it relates to the CA Franchise Tax Board liens and or the Abstract Civil Judgement? My?assumption is that the 1st Deed of Trust will be the priority lien over all other liens of record. Is this correct Sean?

Thank you.


#5

Hi, I have a similar question. I sold a house and carried the 1st of 120k. The buyer stopped making payments about 3 months after I sold him the house and I had to foreclose.

Right after he bought the place, the FTB put 4 liens on the house naming the buyer as the person that owes them money.

I took the property back at the Trustee Sale as no one else bid on the property.

Now, the FTB is telling me that they will not remove the liens from the property??

Help. I am 61 years old with Parkinsons and this house represents my life savings.


#6

A purchase money loan (a loan used to finance the purchase of a property - which yours is) has absolute priority - even over pre-existing liens. These FTB liens were junior to yours. What makes you think you need releases from them? Who handled your foreclosure? Have you tried to resell the property and ordered a title report? How/why did the FTB even contact you?