I recently reviewed some information in connection with a conversation with another person and thought it might be of interest to other real estate professionals. Basically, cities and towns enacted local ordinance which established code enforcement liens as being on par with tax liens in title superiority. Thus, even if a first mortgage holder named the municipality as a defendant in a foreclosure suit the code liens were not foreclosed as they were on par with tax liens which by state statute are superior to all other liens. This always seemed a bit odd for a state like Florida which as a lien theory state holds that the first mortgage holder does not own a mortgaged property but simply has a lien on it. They do not own the property so how could they be held responsible for keeping it well kept. The bank would foreclose it’s lien on a property and either a) take title at the foreclosure auction or, b) a third party would take title at this auction. Either one of these two parties would still need to clear the superior non-foreclosed liens including code liens. Well, one of the banks took the municipality to court over this and they won. the municipality appealed all the way to the Florida Supreme Court and they determined that in fact the municipalities had over reached their authority and that code liens are in fact similar to other secondary liens following a first in time, first in line (for payment) methodology. This is a link to the Supreme Court Decision Sc11-380…
And to a bulletin from Old Republic Title Insurance…
