The Fourth District in Florida recently reversed itself in Ober v. Town of Lauderdale-by-the-Sea. It concluded that inferior liens are not extinguished until the certificate of sale is issued in a foreclosure proceeding. Essentially, the court determined that the lis pendens statute applied to liens that both occurred before and after the date of the final judgment in a foreclosure proceeding.
A Practical Result
In Ober, a bank got a final judgment of foreclosure in 2008. However, the foreclosure sale did not actually occur in 2012. In the meantime, Town of Lauderdale-by-the-Sea recorded seven liens on the property that related to various code violations. The bank bought the property in 2012, and then later sold it to Ober. The question for the court was whether the liens that were in place from 2009 through 2011 were valid even after the foreclosure sale. The court determined that each lien was discharged as long as it occurred before the foreclosure sale.
The court stated that its ruling is in line with the practical reality that there are several procedural aspects of a foreclosure that will still occur long after the final judgment. In fact, many of the most important aspects of a foreclosure have yet to happen, including the sale itself. The court concluded that the lis pendens continues through a “judicial sale.” The sale, then, discharges all liens, regardless of whether they occurred before or after the judgment.
Setting the Record Straight
In September 2016, the court entering a ruling that stated that inferior liens were extinguished at the point of the final decision in the foreclosure case, not when the certificate of sale is issued. The ruling created questions as to whether liens asserted in the interim period were valid as of the sale. The more recent decision overrules this prior case and is more in line with established precedent on the issue.