State Spotlight: Florida Court Decision May Bring Difficulties for Servicers

Recently, a court case in Florida has caused controversy due to its potential to cause difficulty for servicers in the disposition of foreclosed properties. This particular case, Ober v. Town of Lauderdale-By-The-Sea, brings into question the application of Florida’s lis pendens statute to liens placed on property between a final judgment of foreclosure and the judicial sale. The court’s decision determined that liens placed on a property during that period of time are not extinguished by the statute.

In Ober v. Town of Lauderdale-By-The-Sea, a municipality recorded seven liens on the property, relating to code violations between 2009 and 2011. The case notes that each violation occurred after the loan entered final judgment in 2009. The property was sold in 2012, with a certificate of title being issued. The municipality argued that the lis pendens should be deemed to terminate on the date of final judgment, which would mean that it would not extinguish the relevant liens placed on the property subsequent to final judgment. The court agreed and determined that “a lis pendens bars liens only through final judgment, and does not affect the validity of liens after that date, even if they are before the actual sale of the property.”

The result of this case could present a challenge to servicers in Florida that take possession of distressed properties via the foreclosure process. The gap period between the time that final judgement is entered in the foreclosure and the sale date is left exposed to the possibility that municipal bodies could place a lien on the property, complicating its alienability.

The case is pending appeal.