Priority Over Other Types of Liens.
The mechanic’s lien has a high priority in contrast with other types of liens in part because it “relates back” to the time when work had visibly commenced on the project. For new construction, the mechanic’s lien will generally have priority over all liens on the property, except an acquisition loan or construction loan. With regard to foreclosure on the property, the lien will survive, unless it’s a construction loan.
Bankruptcy.
A bankruptcy by the owner or an upstream contractor creates an automatic stay of state court proceedings and ultimately, would probably eliminate lien rights for alteration or repair contracts. That said, please keep in mind that the formal notice must still be served within the normal time limits. It could be argued that a bankruptcy by an owner would stay service of a Notice of Intent, however, that is not a wise assumption to make, because if you are wrong, the entire lien claim is extinguished if the formalities are not followed precisely. It is also unclear whether bankruptcy by the owner or an upstream contractor would operate to stay the filing of the Lien Claim with the department of court records. The best course would be obtain relief from the stay (by entering an appearance in the bankruptcy proceedings) and then file the Claim within the normal deadlines.
With regard to new construction, the lien is not considered a “preference” in the bankruptcy courts because the claimant always had the mechanic’s lien from the onset of “visible commencement” of work on the project.
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