Florida court upholds city’s rights to place liens on zombie homes

Servicing

In a move that should help municipalities within the state of Florida fight against the state’s glut of zombie foreclosures, a state appeals court ruled recently that liens placed on foreclosed homes by the city are not discharged when the home goes through a judicial sale.

The decision, first spotted by Law360, comes from the Fourth District Court of Appeal of the State of Florida, which upheld a lower court’s ruling that liens placed on abandoned properties by Florida cities for code violations cannot be extinguished once the home is sold through the judicial process.

The decision is impactful for Florida cities because the state currently has the third highest total of zombie foreclosures, which are homes that have been foreclosed on and abandoned by the homeowner but not yet sold.

According to recent data from RealtyTrac, Florida has 2,467 zombie foreclosures as of the second quarter of this year, ranking behind only New Jersey, which has 4,003 zombie homes, and New York, which has 3,3352 zombie homes.

And a separate report from RealtyTrac shows that Florida’s foreclosure timeline, that is the time it takes from the first public notice of foreclosure to complete the foreclosure process, is the fifth highest in the nation, checking in at 1,012 days.

The decision in question stems from a home that was foreclosed on in 2008, but not sold at a foreclosure sale until 2012.

According to court documents, between July 13, 2009, and Oct. 27, 2011, the Florida town of Lauderdale-by-the-Sea recorded a total of seven liens on the property in question related to various code violations.

The court documents stated that all seven liens stemmed from code violations occurred after the final judgment of foreclosure was entered but before the home was sold.

Eventually, the property was sold at a foreclosure sale in September 2012. After that sale, the property owner filed suit to quiet title on the home, attempting to rid the homes of the liens placed on it during the foreclosure process.

Lauderdale-by-the-Sea then counterclaimed to foreclose the liens, with both parties then moving for a summary judgment in the case. The lower court granted the town’s motion and denied the property owner’s request, entering a final judgment of foreclosure on the liens in question.

“The lis pendens statute serves to discharge liens that exist or arise prior to the final judgment of foreclosure unless the appropriate steps are taken to protect those interests,” the court ruled.

“However, it does not affect liens that accrue after that date,” the court continued. “The ten liens that were involved in the case before us were all recorded and based on conduct which occurred after the date of the first final judgment. The trial court therefore did not err in entering summary judgment in favor of the Town foreclosing those liens.”

The court’s full decision can be read here.

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