(a) This section applies only where there is a partial taking of property encumbered by a lien and the part taken or some portion of it is also encumbered by a junior lien that extends to only a portion of the property encumbered by the senior lien. This section provides only for allocation of the portion of the award, if any, that will be available for payment to the junior and senior lienholders and does not provide for determination of the amount of such portion.

(b) As used in this section, “impairment of security” means the security of the lienholder remaining after the taking, if any, is of less value in proportion to the remaining indebtedness than the value of the security before the taking was in proportion to the indebtedness secured thereby.

(c) The portion of the award that will be available for payment to the senior and junior lienholders shall be allocated first to the senior lien up to the full amount of the indebtedness secured thereby and the remainder, if any, to the junior lien.

(d) If the allocation under subdivision (c) would result in an impairment of the junior lienholder’s security, the allocation to the junior lien shall be adjusted so as to preserve the junior lienholder’s security to the extent that the remaining amount allocated to the senior lien, if paid to the senior lienholder, would not result in an impairment of the senior lienholder’s security.

(e) The amounts allocated to the senior and junior liens by this section are the amounts of indebtedness owing to such senior and junior lienholders that are secured by their respective liens on the property taken, and any other indebtedness owing to the senior or junior lienholders shall not be considered as secured by the property taken. If the plaintiff makes the election provided in Section 1265.220, the indebtedness that is deducted from the judgment is the indebtedness so determined, and the lien shall continue until that amount of indebtedness is paid.

(Added by Stats. 1975, Ch. 1275.)