Florida's Fourth District Court of Appeal breathed life back into the lis pendens statute by reversing course in Ober v. Town of Lauderdale-By-the-Sea. On a motion for rehearing, the Court withdrew and replaced its August 24, 2016 opinion, which "eviscerated" the lis pendens statute by holding that liens placed on property between a final judgment of foreclosure and the judicial sale were not discharged by Florida Statute § 48.23. For an in-depth discussion of the Court's August 24, 2016 opinion, click here. Consistent with the real property and mortgage industry's understanding of the practical impact of the lis pendens statute, the Court's new opinion holds that liens placed on property between a final judgment of foreclosure and a judicial sale are discharged by Florida Statute § 48.23(1)(d).
In 2008, a final judgment of foreclosure was entered in favor of the foreclosing bank, and in 2012, the bank purchased the property at the judicial sale. However, between the entry of the final judgment and the judicial sale four years later, numerous liens were recorded on the property by the Town of Lauderdale-by-the-Sea. The bank sold the property to Ober, who filed suit to remove the liens from the property, and the Town of Lauderdale-by-the-Sea counterclaimed for foreclosure of those liens. The trial court entered final judgment of foreclosure in favor of the Town of Lauderdale-by-the-Sea, and Ober appealed.
In its new per curiam opinion, the Fourth District Court of Appeal reversed the trial court, concluding that the recordation of a lis pendens operates as a bar to the enforcement of all interests and liens, regardless of whether the unrecorded interest existed before or after the date of the final judgment, until judicial sale of the property occurs. To reach its holding, the Court considered "how foreclosure suits operate in the real world" and recognized the unique nature of a foreclosure proceeding as compared to a typical civil lawsuit. The Court's prior August 24, 2016 opinion reasoned that a lis pendens terminates along with the foreclosure action and that "termination" occurs 30 days after entry of the final judgment. However, as the Court's new opinion acknowledges, numerous additional events occur after the entry of a final judgment of foreclosure, e.g. judicial sale, issuance of the certificate of sale and title, and prosecution of a deficiency claim, among others, and the trial court typically retains jurisdiction to adjudicate these issues. The Court recognized that the final judgment is not typically the final resolution in a foreclosure proceeding, a fact reflected in the lis pendens statute's reference to the occurrence of a judicial sale. Thus, the Court concluded, the effect of the lis pendens continues until the judicial sale, at which time, all liens are discharged regardless of the timing of their recordation, unless the lienor timely intervened in the action.
The Court's prior August 24, 2016 opinion was disruptive and unsettling because its holding was contrary to the mortgage industry's understanding of the impact of the lis pendens statute, but the new opinion restores the law to its status quo before the issuance of the Court's prior opinion. Given the investment of the parties and the significance of this issue, the Town of Lauderdale-by-the-Sea may seek review from the Florida Supreme Court. Additionally, the Legislature may choose to amend or clarify the effect of the lis pendens statute. Until then, foreclosing lenders and purchasers at foreclosure sales can breathe a sigh of relief that a lien cannot be recorded between the final judgment and the judicial sale that will adversely impact the marketability of title.
The full Ober opinion can be accessed here.