In a recent decision issued by the Fourth District Court of Appeal, the court held that while a lis pendens may discharge liens that exist prior to entry of a final judgment of foreclosure, it does not affect those that accrue after the date on which the judgment is entered.
In Ober v. Town-Of-Lauderdale-By-The-Sea, the bank recorded a lis pendens as part of a foreclosure action. After the bank obtained a final judgment of foreclosure and before the property was subsequently sold four years later, the town recorded several liens related to various code violations. Thereafter, the successful purchaser at the foreclosure sale sought to quiet title to the property essentially attempting to void the liens issued by the city. In response, the city sought to foreclose its liens. The trial court sided with the city and entered a final judgment of foreclosure on its liens.
On appeal, the court affirmed the trial court’s ruling and ruled that liens placed on the property during this window are not discharged by the lis pendens. In determining the “shut off” date, the appellate court looked to the related statutory provisions. Specifically, Fla. Stat. 48.23(1)(a) provides that “[a]n action in any of the state or federal courts in this state operates as a lis pendens . . . only if a notice of lis pendens is recorded.” As such, the court reasoned that since the action itself was the actual lis pendens, which takes effect if and when a notice is filed, the lis pendens must likewise terminate along with the action. In the instant matter, the “action” was the foreclosure action initiated by the bank, which terminated 30 days after the court’s issuance of a final judgment. The court cited several cases in support of this position although admitting the specific issue did not appear to have been litigated in any of the decisions.
Banks, lenders and mortgage holders need to take heed of this decision and its implications. While there were significant, unexplained delays between entry of the judgment and the foreclosure sale in this case, this situation perhaps could have been avoided had the bank simply proceeded with the sale in a timely manner. Although not implicit, the court’s decision seems to suggest a 30-day safe harbor. In other words, the lis pendens will not expire until 30 days after the judgment is entered. As such, and given Florida law provides that the court may direct the clerk to sell the property at public sale on a date not less than 20 days or more than 35 days after the date of the final judgment, lenders should be prepared to proceed with the foreclosure sale once judgment has been entered and should likewise consider requesting the earliest date possible so as to fall within that 30-day window. Otherwise, any liens recorded afterwards could constitute a cloud on title and would necessitate the filing of a separate action in an effort to foreclose these liens, which would be an additional expense and result in further delay.