January 22nd, 2014

FIRST IN TIME/FIRST IN RIGHT; CITY CODE ENFORCEMENT LIENS DEEMED INFERIOR TO MORTGAGE LIEN RIGHTS

FIRST IN TIME/FIRST IN RIGHT;

CITY CODE ENFORCEMENT LIENS DEEMED

INFERIOR TO MORTGAGE LIEN RIGHTS

 

By Michael W. Leonard, Esquire

Boyle, Gentile, Leonard & Crockett, P.A.

 

On May 16, 2013, the Florida Supreme Court issued its long-awaited decision relevant to the priority of a city ordinance “superpriority” lien to that of a prior recorded mortgage. The specific issue on appeal to the Supreme Court of Florida was “[w]hether under Article VIII, section 2(b), Florida Constitution,section 166.021, Florida Statutes and Chapter 162, Florida Statutes, a municipality has the authority to enact an ordinance stating that its code enforcement liens, created pursuant to a code enforcement broad order and recorded in the public records of the applicable county, shall be superior in dignity to prior recorded mortgages?” City of Palm Bay v. Wells Fargo Bank, N.A., 114 So. 3d 924 (Fla. 2013).

 

The City argued that it was permitted to allow its ordinances to have superpriority pursuant to the “broad home rule powers” afforded municipalities. Florida Statute 162.09(3) (2004)provides that certified copies of a code enforcement order imposing a fine, or a fine plus repair costs, may be recorded in the public records and shall thereafter constitute a lien against the land on which the violation exists and upon any other real or personal property owned by the violator. Furthermore, according to Section 2(b), Article VIII of Florida’s Constitution, the legislative body of each municipality has the power to enact legislation concerning any subject matter upon which the state Legislature may act. Some municipalities treated these laws as allowing them to create “superpriority” ordinances which would therefore allow the municipal liens, even when recorded after a mortgage, to take precedence over an earlier recorded mortgage, thereby insuring that these liens would be satisfied, whether by the bank or the successful bidder at foreclosure sale.

 

However, as noted by the Supreme Court, Florida law determines the priority of interests in real property based, in general terms, as “first in time, first in right”. In other words, generally speaking, those who record their interests first have priority over later recorded interests.

 

The Supreme Court of Florida agreed with the Fifth District Court and concluded that the superpriority provision of the Palm Bay ordinance was invalid because it conflicted with the state recording statutes. This case demonstrates that municipalities cannot treat code violations, recorded after prior recorded documents, as having priority. Simply stated, provided that the mortgage holder has named the municipality as a defendant for its subsequently recorded liens, these liens may be foreclosed.

 

 

 

 

 

 

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