Judicial Update: Florida Supreme Court Upholds Priority of Prior Recorded Mortgage Over Code Enforcement Liens
It took a while, but the Florida Supreme Court recently upheld a 2011 5th District Court of Appeals' decision invalidating a city ordinance that gave priority to code enforcement liens over prior-recorded mortgages. City of Palm Bay v. Wells Fargo Bank, N.A., Case No. SC11-830 (May 16, 2013). Palm Bay's ordinance had attempted to establish that the City's code enforcement liens were co-equal with state and local tax liens and were "superior in dignity to all other liens, titles and claims."
This Blog first reported on this case in March and April of 2011, when the 5th DCA initially struck down the ordinance and then certified the question as one of great public importance to the Supreme Court. In a 5-2 decision, the Supreme Court found that the ordinance "establishes a priority that is inconsistent" with State statutory law. The Court held that the prioritization scheme established in Chapter 695, Florida Statutes, was controlling and that, if the ordinance was upheld, it would allow the municipality "to displace the policy judgment reflected in the Legislature's enactment" of Chapter 695. Under Section 695.11, the sequence of recordation determines the priority of an instrument, with a document bearing a lower recordation number having priority over a document having a higher recordation number.
The legal significance of this priority is reflected in Section 695.01(1), which provides that a conveyance or transfer of any interest in real property is not "good and effectual … against creditors or subsequent purchasers" unless it is "recorded according to law."
Accordingly, the Palm Bay ordinance was held invalid as being in conflict with state law. A dissenting opinion would have upheld the ordinance as being within the broad home rule powers of Florida municipalities.
The Importance of the Palm Bay Decision
With the rise in both foreclosures and code enforcement activity in many jurisdictions in recent years, this decision provides certainty to mortgage holders that their liens will not be subject to displacement by a subsequent code enforcement lien that arose through a code enforcement proceeding. The decision also reinforces the limits on local ordinances that deal with matters that are comprehensively legislated at the state level.
Please note that, as of this writing, the time for moving for a rehearing on this decision has not expired.
Flickr Photo Courtesy of Curb Crusher