In my Blog in May 2013, regarding the Florida Supreme Court (S.C.) case of City of Palm Bay v. Wells Fargo Bank, I discussed that the court ruled that a municipal ordinance which grants municipal code enforcement liens super priority on par with real property taxes, is in conflict with Florida law.

The affect of this ruling is that municipalities may no longer assert that their code violation liens have priority over previously recorded mortgages. I mentioned that this decision is significant, as investors, lenders and purchasers in theory no longer have to worry about municipal liens taking super priority over their earlier recorded mortgages. However, regarding the application of how title underwriters will address this new ruling, I told you to stay tuned.

So now that some time has passed since this ruling, here is how some title underwriters are now handling the application of this new S.C.  decision.

Every code violation consists of two aspects to the violation: (1) the actual compliance with the violation (2) paying the monetary fine for the violation.

So while this new S.C. case resolves the monetary issues by taking away the super priority of lien, the title agent must still obtain written confirmation from the municipality that the property is in compliance and that the violation is no longer continuing on the property. The concern is once the foreclosure is complete and the property is now in the name of the lender, if the violation is still ongoing, the municipality may try to collect fines and may even re-lien the property. Also,  despite the S.C. ruling , if the municipality claims money is still due, then the title agent must get the municipality to agree, in writing, no money is due based on the S. C. ruling.

So as a result of this S.C. ruling, title agents will no longer need to obtain a release of lien to clear title or pay any fine, if: (a) the municipal lien is subordinate to the mortgage being foreclosed and (b) the municipality is properly named and served in the foreclosure action and (c ) the property is in compliance.   

While this is how some title underwriters are deciding to approach the S.C.  ruling we still don’t know how the municipalities are going to apply the S.C. case.  So I guess we still need to stay tuned.

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Posted by: marvinkatz on July 5, 2013