Business and Legal Insights

Until late 2016, Florida appellate courts had not considered what happens to liens placed on property between a foreclosure final judgment and a foreclosure sale. However, an August 24, 2016 opinion issued by the Fourth DCA had the immediately and fundamentally altered the foreclosure sale process. After hearing from financial institutions and the legal community, the Fourth DCA changed its original opinion and ruled that liens recorded after a lis pendens, but prior to a foreclosure sale, are discharged.

In Ober vs. Town of Lauderdale-by-the-Sea, 41 Fla. L. Weekly 1978, Case No. 4D 14-4597 (Fla. Fourth DCA, August 24, 2016), a bank filed a foreclosure complaint and recorded a lis pendens in late 2007. A year later, the bank obtained a final judgment of foreclosure—the judgment retained jurisdiction to enter further orders, as is usually the case.

Between July 2009 and October 2011, the Town of Lauderdale-by-the-Sea recorded seven code enforcement liens against the foreclosed property for violations that happened after the judgment. In September 2012, Ober was the high bidder at the foreclosure sale. After obtaining title, Ober filed a lawsuit to remove the liens against the property, arguing that the lis pendens statute discharged all liens prior to the foreclosure sale. The Town then moved to foreclose its liens, arguing that its liens were valid.

The trial court agreed with the Town, and in its initial opinion the Fourth DCA also agreed, holding that liens placed on a property after a final judgment of foreclosure, but before the foreclosure sale, are not discharged. The Fourth DCA reasoned that the recording of the lis pendens served as the notice of an action pending against the property and that the action ended once the judgment becomes final, meaning that any liens filed against the property between a foreclosure judgment and a sale were not discharged.

Ober then filed a Motion for Rehearing, and last week the Fourth DCA withdrew its opinion and substituted a new opinion. This time, the court rejected the Town’s argument that the statute applies only to liens existing or accruing prior to the date of the final judgment. The Fourth DCA instead held that the lis pendens statute suggests that when a foreclosure lawsuit is litigated to a foreclosure sale, that the sale discharges all liens, whether recorded before or after the final judgment. The Fourth DCA recognized that unlike many other types of lawsuits, a foreclosure judgment is not the “end of the road”— there is still the need for a sale, issuance of title and prosecution of deficiency claim.