Distinguishing its prior ruling in U.S. Bank National Ass’n v. Quadomain Condominium Ass’n, the District Court of Appeal of the State of Florida, Fourth District, recently held that a foreclosure of a homeowners association’s lien against the property owner filed after the recording of a lis pendens by a first mortgagee is not barred, where the association’s subordinate lien was imposed under the association’s declaration of covenants recorded before the first mortgagee recorded its lis pendens.

In so ruling, the Court confirmed that the homeowners association’s foreclosure action is inferior to the foreclosure of the first mortgage.

A copy of the opinion is available at:  Link to Opinion.

The first mortgagee on real property subject to a homeowners association’s recorded covenants and restrictions sued to foreclose the mortgage in 2007, naming the association as a defendant and recording a notice of lis pendens at the same time. The homeowners association’s declaration of covenants and restrictions had been recorded prior to the recording of the mortgage.

The homeowners association recorded a claim of lien for unpaid assessments in 2011, sued in 2012 to foreclose its lien, and obtained a final default judgment. Later, the mortgagee’s successor in interest obtained a final judgment of foreclosure in the previously-filed mortgage foreclosure action.

The borrower then filed a motion seeking to vacate the homeowners association’s 2012 lien foreclosure judgment, relying on the Fourth District Court of Appeal’s earlier ruling in U.S. Bank National Ass’n v. Quadomain Condominium Ass’n, 103 So. 3d 977 (Fla. 4th DCA 2012). The trial court denied the motion and the borrower appealed.

As you may recall, Fla. Stat. §  48.23(1)(d) provides that the recording of a lis pendens creates a bar to enforcement and provides for extinguishment of any unrecorded interests or liens if the case referenced in the lis pendens proceeds to judicial sale.

On appeal, the Fourth District framed the issue before it as “whether the filing of the notice of lis pendens by the first mortgage holder constitutes a bar to the Association’s foreclosure action based upon a claim of lien for unpaid assessments filed after the notice of lis pendens.”

The Appellate Court concluded that “[b]ecause the Declaration of Covenants, which included provisions with respect to the Association’s right to lien and foreclose on the property, was a recorded ‘interest’ at the time of the filing of lis pendens, … even though the lien was inferior to the mortgage, section 48.23, Florida Statutes, constitutes no bar to the enforcement of the lien between the Association and [the borrower].”

The Court reasoned that “[a] lis pendens serves two main purposes: (1) to give notice to and thereby protect any future purchasers or encumbrancers of the property; and (2) to protect the plaintiff from intervening liens.”

The Appellate Court then distinguished its earlier ruling in Quadomain because, although noting it “does appear to preclude an association from filing a foreclosure action and lis pendens based on a lien filed after a lender with a superior interest has filed a foreclosure action and recorded a lis pendens … (1) the association in Quadomain was attempting to foreclose its lien against the bank’s interest, as well as that of the homeowner, unlike the present case where the Association only foreclosed against the delinquent homeowner; and (2) the association’s lien in the present case was imposed under the association’s declaration of covenants recorded before the Lender recorded its notice of lis pendens.”

The Fourth District also held that, although not addressed in Quadomain, the homeowners association’s declaration of covenants “may qualify as an ‘interest’ under section 48.23(1)(d), Florida Statutes.”  It buttressed this conclusion by citing section 720.3085, Florida Statutes, which “provides that the lien for unpaid assessments relates back to the recording of the declaration of community … However, as to determining superiority over first mortgages of record, the lien is effective only from the date the claim of lien is recorded.”

The Court concluded that “[b]ecause the Declaration was recorded prior to the Lender’s lis pendens, a foreclosure action based upon a claim of lien filed under its terms is not barred by section 48.23(1)(d).”

The Court further concluded that one of the purposes of the lis pendens statute – i.e., protecting the mortgagee from liens unrecorded the time of filing — would not be served by allowing the homeowner to assert priority over the association’s interest.

“Although section 48.23(1)(d) … creates a ‘bar to … enforcement’ and provides for extinguishment of any unrecorded interests or liens if the case proceeds to judicial sale, the statute is not designed to protect the delinquent homeowner. Unlike Quadomain, the Association’s suit did not involve the Lender.” In addition, the Court found it significant that “the Lender’s priority is not at issue here, and the Association acknowledges the Lender’s superior interest.”

Accordingly, the Court affirmed the lower court’s order denying the homeowner’s motion to vacate the final judgment.