WEST PALM BEACH, Fla. — A decision last month in Florida’s 4th District Court of Appeal ruled that inferior liens are not nullified during a foreclosure until a certificate of sale is issued.
The Jan. 25 decision, according to a report on jdsupra.com, was a reversal of a ruling of the court last year that said that all junior lienholders and unrecorded interests were nullified when a final judgment was determined.
The ruling, according to an article on BakerDonelson.com, stemmed from the complaint, Ober v. Town of Lauderdale by the Sea. In September 2008, a judgment of foreclosure was brought on the land in question, according to a copy of court documents. From July 13, 2009, through Oct. 27, 2011, the town recorded seven liens on the property for various code violations.
The property was sold at foreclosure on Sept. 27, 2012, to Ober. After the purchase, the title to the property was issued. However, starting in February 2013, the town placed three more liens on the property.
Ober then filed a lawsuit in an attempt to strike the liens against his property. The town fought back to collect the liens that were issued prior to Ober buying the property. At trial, Ober’s motion was denied, making him responsible for the 10 liens on the property. The case was then appealed.
This initial judgment interrupted years of how the settlement of liens on foreclosures worked. The court basically held that junior lienholders were nullified when a judgment was brought down. Therefore, all the liens the town had on the property that Ober purchased were not affected by the foreclosure, and that Ober was responsible for them.
According to a report on bipc.com, a law-firm website, Ober filed for a rehearing with support from amicus briefs by Florida legal and banking associations.
In the new ruling, the court rejected the initial argument that the lis pendens — or action pending — statute applied only to liens that existed prior to the judgment date.
“In my opinion, the court reversed its ruling because they realized that they ruled in error, largely due to the impact and well-reasoned amicus briefs that were submitted, which the court did not have initially,” Diana Matson of Baker, Donelson, Bearman, Caldwell, & Berkowitz, PC, told the Florida Record. “The decision mentions that it followed the reasoning of a number of the briefs submitted, including the Florida Bar Business Law Section, the Florida Land Title Association and the Florida Bankers Association.”
For example, the court referenced a brief submitted by the Florida Land Title Association wherein it noted that the statute considers the lis pendens is active through a “judicial sale.”
The court also ruled that the sale of the property should discharge all liens before and after the final judgment of sale.
“Liens can continue to be recorded against any property while it is in foreclosure,” Matson said.
The new ruling relieves lenders of worrying about liens on a property when there is any delay from final judgment until a foreclosure sale is held.
“The decision means that any liens that are recorded against a property after the judgment is entered will be wiped out when the foreclosure sale is completed, and will not survive,” Matson said. “This gives the foreclosing lender clean title, which is the goal of the foreclosure and always has been.”