Spoiler Alert: No need to read on for the answer to the question posed in the title to this article. The answer is “all of the real or personal property owned by the violator once a certified copy of the order imposing a fine is recorded in the public records.”

But what does this mean in practical terms and why should you be concerned about it. Perfect case in point: A client who is a home builder had located a few vacant residential lots located in Loxahatchee, Florida being offered for sale at the very good price of approximately 50% the value of comparably situated lots by a very sophisticated investor who had purchased these and numerous other properties located in Palm Beach County at bargain rates over an extended period of time at tax deed sales (the “Seller”). Unfortunately, the Seller did little to maintain its large portfolio of properties acquired at tax deed sales during its tenure of ownership and many of these properties had been cited for code violations and built up numerous recorded liens over the years in the various incorporated and unincorporated areas of Palm Beach County in which they were located.

When our home builder client came to us with contract in hand to purchase the two vacant lots in Loxahatchee, our primary focus was to determine whether title acquired by the Seller through the tax deed sale was sufficient or remedial steps needed to be taken by way of a quiet title action in order to establish a proper chain of title. We of course also ran a municipal lien, tax and open permit search against the properties to see if any other issues were presented. The title commitment stated that there were 31 different Code Enforcement Liens recorded against 18 of the Seller’s properties located in Palm Beach County that also show up on the title to each of the vacant lots in Loxahatchee. But while the newly performed municipal lien and tax research noted that there were pending code violations lien against other properties owned by the Seller in Palm Beach County, the municipal lien and tax research specifically omitted any cost or liability figures associated with these 31 different Code Enforcement Liens recorded against 18 of the Seller’s properties because NONE of them were recorded against the specific vacant Loxahatchee lots that our client was purchasing for from the Seller.

So which research is telling the truth? The title commitment that states that 31 different Code Enforcement Liens recorded against 18 of the Seller’s other properties in Palm Beach County also affect title to each of the lots our client was purchasing or the municipal lien an tax research that omitted any cost or liability figures associated with these 31 different Code Enforcement Liens recorded against 18 of the Seller’s properties because the municipal lien and tax research stated that NONE of them were recorded against the specific vacant Loxahatchee lots that our client was purchasing? The Spoiler Alert at the outset of this article gives the answer away with the edited quote from Florida Statutes, Section 162.09 (3).   BELIEVE THE TITLE COMMITMENT. Clearly, if the municipal lien and tax research company is telling you that there are pending Code Enforcement Liens against other properties owned by the Seller in Palm Beach County, these same Code Enforcement Liens affect ALL properties owned by the Seller even though they were not recorded against the specific property which was the subject of the municipal lien and tax research.

Florida’s recording statute gives priority to the real property lienholder who is first to record in the public records of the county where the property is located. There are certain limited exceptions to this general rule. One of the exceptions that most mortgage lenders doing business in the state of Florida are familiar with is the exception for the first lien priority created by Florida statutes for ad valorem or real estate taxes assessed by the property appraiser against real property.

Previously, mortgage lenders could accurately quantify the amount of the potential prior lien for unpaid real estate taxes that could prime their lien by examining county tax records. However, under the very recent case of Miami-Dade County vs. Landowne Mortgage, LLC, 2017 Fla. App. Lexis 14751 (3rd DCA), this analysis may no longer be accurate when refinancing an existing homeowner. In the case, Miami-Dade County filed a 2014 tax lien against the property on which Landowne had previously secured its first mortgage in 2007. The 2014 Miami-Dade tax lien imposed against the property was for up to 10 years worth of improper homestead exemptions previously received by the present owner of the property during his prior years of ownership. Florida Statutes, Section 196.161 allows property appraisers a look back period of 10 years to recoup the amount of any homestead exemptions improperly received, plus a 50% penalty and 15% interest. However, prior to this most recent ruling, it was not clear that a tax lien filed against a property for improperly received homestead exemptions would have a retroactive effect, which would prime the prior recorded lien of a mortgage granted by a lender who had no knowledge of the existing property owner’s improper claim of a homestead exemption.

This problem does not arise in connection with loans to homeowners who are buying a home and obtaining purchase money financing (as opposed to refinancing an existing loan) because the tax lien for improperly received homestead exemptions will only attach to the property owned by the non-exempt owner at the time the tax lien is filed. Prior to the filing of a tax lien of this nature, any purchaser for value of the property on which the improper homestead exemption was claimed will take free and clear of this retroactive tax lien.

Cash strapped local governments aided by ever improving data gathering techniques and the Miami-Dade County vs. Landowne Mortgage, LLC decision may  increasingly turn to real estate tax revenues presented by improperly claimed homestead exemptions. Accordingly, residential mortgage lenders who are refinancing loans for existing homeowners should seek advice from loan counsel who can effectively address this new landscape.

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