Understanding Junior Liens in Pennsylvania

In Pennsylvania, a foreclosure by a first mortgage divests all subordinate mortgages and judgment liens - provided proper notice is given.  

Immediate Actions for Junior Lienholders

If a junior lienholder receives a notice of sale for a senior mortgage, they must pay off the senior mortgage or be prepared to bid at the sheriff’s sale to protect their interest. Our recommendation is to reach out to the senior lienholder immediately for a payoff statement. Typically, the upset price, or the minimum amount the property would be sold for at sheriff’s sale, is not available until closer to the sale date.

‍Understanding Pa.R.C.P. 3129.1 and 3129.2

Lienholder notices are required pursuant to Pa.R.C.P. 3129.1 and 3129.2(c)(1)(iii). An affidavit must be filed with the sheriff before a property can go to sheriff’s sale. The individuals that need to be listed in the affidavit include the owner, any party with a judgment or mortgage on title, any other person with any record interest in the property and anyone with an interest not of record which may be affected by the sale.

‍Importance of Timely Notification: Rule 3129.2(a) Explained

Rule 3129.2(a) states that notice to all the individuals set forth on the affidavit must be sent at least 30 days prior to the date of sale. The notice must describe the property, the judgment, the name of the owner and the time and place of the sale. Service of the notice of sale on lienholders is complete as of the date of the mailing. Even if the mail is returned, service of the notice of sale is still valid.  

It seems that the date filing the writ of execution cuts off the attachment of additional liens requiring notice. See Gambler v. Huyett, 451 Pa. Super. 351, 679 A.2d 831 (1996). However, if there is sufficient time before sale, the best practice may be to send out notice in order to avoid having to litigate the issue post-sale. Additionally, the best practice is to send to any and all addresses associated with a lienholder. If you can’t find the lienholder but know who represents that party in pending litigation, sending notice to the lienholder at their last known address and the attorney of record may be sufficient. See M&T Mortgage Corp. v. Kessler, 2003 PA Super 182, 826 A.2d 877 (2003). In conclusion, it is better to send more notice than not enough.  

Failure to provide proper or timely notice to an interested party means that the lien may pass through the sale without being divested or discharged.  

Consequences of Inadequate Notice

If a junior lienholder is not properly notified of the sheriff’s sale, then its lien is not divested and the property is inadvertently sold subject to the junior lien. Pa.R.C.P. 3135(c) provides specific remedies by allowing a plaintiff, its assigns, or the purchaser of a property at a prior sheriff’s sale to petition the court with a rule to show cause requesting (1) that the lien of the junior lienholder be divested, or (2) that another sheriffs sale be held at which the junior lienholder specified in the petition may be the only bidder other than the senior lienholder who acquired the property at the original sale, or (3) that other appropriate relief be granted by the court.

A sheriff’s sale of a junior mortgage cannot divest a valid first position mortgage. A first position mortgage is protected, and given priority, by 42 Pa.C.S. §8152 which provides that, subject to certain exceptions, when the lien of a mortgage upon real estate “is or shall be prior to all other liens upon the same property,” the lien of such mortgage is not destroyed or otherwise affected by any judicial sale. Priority of mortgages is based on the date of recording, regardless of the date of execution.  

Key Takeaways

1. Foreclosure Effects: In Pennsylvania, foreclosure by a first mortgage clears all subordinate mortgages and judgment liens if proper notice is given, emphasizing the importance of understanding the notification process.

2. Notification Rules: Pennsylvania's Rules of Civil Procedure (Pa.R.C.P. 3129.1 and 3129.2(c)(1)(iii)) require specific notifications to lienholders before a property can be sold at sheriff's sale, including details about the property, judgment, owner, and sale time and place.

3. Timely Notice Crucial: Rule 3129.2(a) mandates sending notices to all listed individuals at least 30 days before the sale, with service considered complete upon mailing. Failure to provide timely or proper notice can result in the passing of liens through the sale without being divested or discharged.