IBA Compliance Connection

Your go to source for compliance!

A commercial borrower in Wisconsin is in default, and we have a lien on their real property, which we are contemplating foreclosing. However, the borrower has failed to submit a substantial amount of sales tax to the Wisconsin Department of Revenue, which recently filed liens against the same property. We contacted the Department of Revenue, and they asked us how much we would pay for them to release their liens. Is our lien superior to the Department of Revenue’s liens, and can we potentially foreclose them out?

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While we are not experts on the laws of states other than Illinois, it appears that Wisconsin law provides that mortgages executed to a state or national bank that have been “duly recorded” have “priority over all liens upon the mortgaged premises . . . except tax and special assessment liens filed after the recording of such mortgage.” Consequently, we believe it is possible that a tax lien filed by the Wisconsin Department of Revenue would have priority over your bank’s lien on the commercial borrower’s property, even if you recorded your lien first.

We recommend consulting with bank counsel in Wisconsin to determine whether you can foreclose against a lien of the Wisconsin Department of Revenue.

For resources related to our guidance, please see:

  • Wis. Stat. § 706.11(1) (“Except as provided in sub. (4), when any of the following mortgages has been duly recorded, it shall have priority over all liens upon the mortgaged premises and the buildings and improvements thereon, except tax and special assessment liens filed after the recording of such mortgage and except liens under ss. 292.31 (8) (i) and 292.81: . . . (d) Any mortgage executed to a state or national bank or to a state or federally chartered credit union.”)