The First Shall Be Last: A Contextual Argument for Abandoning Temporal Rules of Lien Priority

Abstract:     
This paper is an empirical and analytical investigation of priority in construction lending. It rests on a substantial set of interviews with construction lenders and borrowers. Generally, it argues that construction lenders are better placed than mechanic's lien claimants to implement procedures that limit the risk of borrower defalcation. Accordingly, it recommends a reversal of the ordinary rule of priority, which permits construction lenders to have priority over mechanic's lien claimants. A reversal of the rule of priority will more effectively police borrower defalcation.

Keywords: lending, lien

JEL Classifications: D23, K11

Accepted Paper Series