Two’s Company, but Three’s a Crowd: A Third Party's Right to Intervene in a Foreclosure Lawsuit

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Are subsequent title holders who obtain an interest in real property during the pendency of a foreclosure lawsuit where a lis pendens has been properly recorded (referred to as a “Purchaser Pendente Lite”), entitled to join in the lawsuit to protect that interest? In Bonafide Properties v. Wells Fargo Bank, N.A., 198 So.3d 694 (2d DCA 2016) the Second District Court of Appeal says no and affirms the long standing doctrine of generally barring the intervention of a purchaser pendente lite in a pending lawsuit for foreclosure.

The prolonged residential foreclosure wave brought with it the rise of the distressed real estate investor, commonly seen at Homeowners and Condominium Association lien foreclosure sales. In a concurring opinion included in Bonafide, the court notes the possible benefits of these investors which include potential payment of accruing “…homeowners’ association dues, the property taxes, and the property insurance,” Id. at 696 (Altenbernd, J. concurring), as well as prospective protection of the Bank’s collateral asset during the course of the lawsuit all in exchange for a likely “…huge return on its investment by renting the house at fair market value after purchasing it for a nominal bid.” Id. at 697.

However, the court also touches on the potential exploitation this practice can bring when the investor’s goal to prolong these profits leads to the use of delaying tactics in the foreclosure lawsuit. Id. With this opinion, the court reiterates that these purchasers take their interest subject to the pending foreclosure action. Id. at 695. For good or for worse, these purchasers are assumed to take the risk of the pending lawsuit when they acquired an interest in the real property. Homeowners and Condominium Associations should be mindful that the same doctrine applies to assessment lien foreclosures and guard against the intervention of the Purchaser Pendente Lite.

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Shumaker, Loop & Kendrick, LLP on:

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