Washington State Clarifies Loan Priority Rules for Lenders
In Washington state, the legislature has recently clarified loan priority rules, ending uncertainty for lenders. House Bill 1420, passed in spring 2023, provides much-needed clarity following a Supreme Court decision.
The Washington Supreme Court's ruling in Commencement Bank v. Epic Solutions, Inc. altered the priority rules for future advances. This change left lenders uncertain about the priority of their advances in non-construction loans.
To address this, the legislature introduced House Bill 1420. The new law, RCW 61.12.190, establishes a clear rule: all sums secured by a mortgage or deed of trust have priority over subsequently recorded encumbrances, regardless of disbursement timing or obligation. This reinstates the first in time, first in right principle for future advances.
House Bill 1420, passed in spring 2023, has clarified loan priority rules in Washington state. Lenders can now operate with certainty, knowing that their advances have priority based on the first in time, first in right principle.
