Michael-BenderBy Michael S. Bender, Esq., Kaye Bender Rembaum, P.L.

On June 7, 2013, the Governor signed House Bill 87 into law, effective immediately, amending portions of the Statutes governing residential mortgage foreclosures in Florida. Although many of the amended provisions within this Bill, and in particular in Chapter 702 of Florida Statutes do not directly affect community associations, a change to the legal procedures which govern how mortgage foreclosure cases can be moved through the court system offers possible benefits to those associations which have been burdened by lagging lender foreclosures, under certain circumstances.

Statute Changes
Section 95.11 F.S., has been changed to reduce the time period within which a deficiency in a lender foreclosure case can be pursued, from five (5) years to one (1) year.  This change applies only to a one-family and four-family dwelling unit and commences on the day after the certificate is issued by the clerk of the court or the lender accepts a deed in lieu of foreclosure. This change also only applies to a foreclosure case that commences on or after July 1, 2013. For older cases, the deficiency must be commenced within five (5) years or by July 1, 2014, whichever occurs first.

Section 702.015 F.S. has been created to identify specific criteria that must be included in the complaint filed in a lender foreclosure.  In addition to the allegations that must be included in the complaint, the new Statute more specifically addresses the requirements involving the original note.
A new Section 702.036 F.S. has been added to address proceedings for attempting to set aside, invalidate or challenge the validity of a final judgment of foreclosure of a mortgage or to establish or re-establish a lien or encumbrance on the property contrary to the final judgment in foreclosure.

Section 702.06 F.S. has been revised to limit the amount of a deficiency that may be pursued in the case of an owner-occupied residential property.
The newly amended provisions of Section 702.10 F.S., appear to attempt to create a “fast track” procedure for residential mortgage  foreclosure cases.  Unlike prior versions of the Statute, the amended Statute now expressly provides that community associations that have been named as a defendant in a lender foreclosure case now have a procedural method with which to force the case to conclusion. An association may now request an order from the court that the other parties to the case (both the lender and the homeowner) provide evidence to the court why a final judgment of foreclosure should not immediately be granted to the lender and the foreclosure sale scheduled. This request may be made by the association at any time and, according to the Statute, must be immediately reviewed by the presiding judge for the case, in chambers without a hearing, who will make a decision regarding the status of the case and whether a final judgment hearing is appropriate. If the court agrees with the motion, the changes outline what the order is now required to include. This expedited review process could potentially save an association from months of unpaid dues in situations when a lender foreclosure case is uncontested but has stalled due to lender inactivity.

Take Caution
Although Section 702.10 F.S. has created a new tool for associations, it is important to note that the amended procedure is not a “panacea” and may not achieve the intended results. As with all newly enacted legislation, it is likely that there will be both legal and practical issues arising during its implementation which were unforeseen, and certainly not covered in the new provisions by the Legislature.  For example, it is unclear whether the already overburdened state court system in South Florida will be able to handle a large volume of these requests without significant delay. Further, the Statute requires the moving party (the association) to submit a proposed final judgment form with the motion, but from a practical perspective, the association will not have sufficient information to fully complete the form, which creates a basis for the lender to vacate such an order at a later date, causing more delay in the case.  Additionally, it is also unclear what options are available to an association should a lender delay its case after final judgment has been entered in its favor, such as cancelling the sale without sufficient basis or vacating the judgment without dismissing the case.  The new provisions expressly do not apply to a foreclosure of an owner-occupied residence.

Despite the uncertainties, however, it is suggested that community associationsreview the pending lender foreclosures on a case-by-case basis with legal counsel and, on those matters that are appropriate, consider taking an aggressive approach under this new procedure.

A new Section 702.11 F.S. has been created to provide adequate protections for lost, destroyed, or stolen notes in a mortgage foreclosure.  Lenders are provided with specific methods to address these conditions sufficiently for the foreclosure to be completed, including options of providing security.  The Statute also addresses methods of resolving competing alleged interests in the same mortgage note.

The new legislation in this bill is remedial in nature and expressly applies to all mortgages encumbering real property and all promissory notes secured by a mortgage, whether executed before, on, or after the effective date of the act, except for the requirements of new foreclosure complaints in Section 702.015 F.S.   Those new requirements apply to foreclosures filed after July 1, 2013. The “fast track” provisions of Section 702.10 F.S. apply to existing cases, as well.

Need Clarification?
Kaye Bender Rembaum dedicates its practice to the representation of community associations throughout Florida.  Mr. Bender can be reached directly via email at mbender@KBRlegal.com.