Also known as: junior lienholder · junior lien holder · junior lien holders · subordinate lienholders
Written by attorneys · grounded in primary & secondary sources — see below
An interest in real property subordinate in priority to a senior lien. The holder receives notice as a necessary party in foreclosure proceedings and may claim any surplus after the senior debt is satisfied. In some jurisdictions the holder may also exercise a statutory right to redeem the property after sale.
Jessica Jacobs holds a recorded second mortgage on a commercial building. When the first mortgagee commences judicial foreclosure, it names Jacobs as a defendant and serves her with process. Because she is joined, the sale extinguishes her lien and she receives no further interest in the property.
Jacob Jennings owns a warehouse subject to a senior mortgage and a junior lien held by June Jiang. After foreclosure the sale produces proceeds exceeding the senior debt and costs. The court directs payment of the surplus first to Jiang before any remainder reaches Jennings.
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Jennifer Jackson, a junior lienholder, learns that the senior mortgagee has foreclosed on a retail property. Within the statutory period she tenders the sale price plus interest and costs to the purchaser. The tender allows her to acquire the property free of the senior lien.
Yes. They are necessary parties whose interests may be extinguished only if they are joined and given notice. Failure to join them can prevent the sale from cutting off their liens.
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Surplus is paid first to junior lienholders in order of their priority and then to the mortgagor. State law governs the exact order and any restrictions on deficiency judgments.
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In states that provide statutory redemption, junior lienholders are sometimes permitted to redeem by paying the sale price plus interest and costs within the statutory window. The purchaser takes subject to that right until the period expires.
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…of redemption taking into consideration whether there is value in the property in excess of the mortgage debt and debt owed to junior lienholders, any assessed but unpaid property taxes, the condition of the property, and any other equities.” 12 V.S.A. § 4528. Here, there was no motion, no oral testimony, and no notice of…