Property owners often want to know which lien has greater priority – the bank’s lien or a city’s code enforcement lien. Until very recently, this issue had not been clarified by the courts. In the City of Palm Bay v. Wells Fargo Bank, N.A., — So.3d —-, 2013 WL 2096257 (Fla. 2013), the Florida Supreme Court ruled that notwithstanding their home rule powers, municipalities may not create code enforcement liens that have superpriority over previously filed interests of record.
In City of Palm Bay, Wells Fargo bank brought a foreclosure action against an owner of real property in the city and named the city as a party due to the existence of city code enforcement liens on the property that were recorded after the bank’s mortgage interest was recorded. The Circuit Court, Brevard County granted the bank’s summary judgment motion and the City of Palm Bay appealed. The Fifth District Court of Appeal, 57 So.3d 226, Cohen, J., affirmed, and certified the question as to whether a municipal ordinance may validly establish superpriority status for municipal code enforcement liens.
The Supreme Court held that the city ordinance that established a superpriority status for municipal code enforcement liens was both inconsistent with, and in direct conflict with, the general statutory scheme for the priority of rights with respect to interests in real property created by the legislature, and thus, invalid. In so holding, the Court ruled that municipal ordinances are inferior to the laws of the state and must not conflict with any controlling provision of a statute; when a municipal ordinance flies in the face of state law, that is, cannot be reconciled with state law, the ordinance cannot be sustained. Any other outcome would be contrary to Article 8, § 2(b) of the Florida Constitution.
The Florida legislature has developed a general statutory scheme for the priority of rights with respect to interests in real property. Allowing a municipality to establish an ordinance containing a superpriority provision for a city’s code enforcement lien would allow a municipality to displace the policy judgment reflected by the legislature, and allow the municipality to destroy property rights established by state law. This is good news for lenders and property owners alike. Although in Florida, a municipality is given broad authority to enact ordinances under its municipal home rule powers, this ruling keeps the balance of power between municipalities and the state government in check. Also, lenders and property owners are no longer beholden to whimsical ordinances enacted by municipalities which destroy the property and priority rights between to parties to a consensual lien. Municipalities beware – The law of the state comes first!