Liens Recorded Between Foreclosure, Sale Date Ruled Valid by Florida Appellate Court

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In a case of first impression among the Florida appellate courts, the Fourth District Court of Appeal held that liens recorded between the foreclosure judgment and the sale date are valid and enforceable against the property so long as the violations underlying the liens occurred after the foreclosure judgment. 

More specifically, in Ober v. Town of Lauderdale-by-the-Sea, a bank recorded a lis pendens on real property prior to commencing a foreclosure action in November 2007. On September 22, 2008, the bank obtained a final judgment of foreclosure. Between July and October of 2011, the defendant town recorded seven liens on the property as a result of code violations that occurred after the foreclosure judgment. On September 27, 2012, the plaintiff purchased the subject property at a foreclosure sale. Subsequently, the town imposed three more liens on the property.

The purchaser then filed a quiet title action to strike the liens, while the town counterclaimed to foreclose on its liens. In Florida, the recording of a lis pendens bars enforcement of any interests and liens that were not recorded before the notice. However, as the statute (Fla. Stat. § 48.23) does not provide an end date, there was doubt as to when a lis pendens expires. The property owner argued the lis pendens expired as of the date of a judicial sale. The town countered that the lis pendens precludes only liens existing or accruing prior to the date of a final judgment.

The Fourth District Court of Appeal held that the lis pendens terminates when the lawsuit ends, which occurs when the judgment becomes final. To reach this interpretation, the court explained that the lawsuit itself is the true lis pendens, not the recorded notice. Therefore, as the action terminates within 30 days of the entry of final judgment, the lis pendens does as well.   

Because the lis pendens at issue in Ober terminated 30 days after the judgment of foreclosure, the liens recorded by the town—both those recorded between the judgment and judicial sale and those recorded after the sale—were valid. 

Companies planning either to foreclose on real property in Florida or to acquire properties at Florida foreclosure sales should review property records between the date of a judgment of foreclosure and scheduled foreclosure sales. Because liens accruing or recorded after the judgment continue to encumber the property after the sale, foreclosure sales may not convey marketable title. Companies should consider either establishing procedures for resolving such liens or adjusting bidding practices to account for the impact of liens on the value of the property. The decision also illustrates the risks inherent in allowing a property to languish on the docket following entry of a foreclosure judgment.

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