Florida Statutes Section 713.13 provides that an owner shall record a Notice of Commencement prior to commencing to improve real property, or recommencing completion of any improvements after default or abandonment of the construction. Without going into all of the details and nuances of Florida’s Construction Lien Statute, Chapter 713 is designed, overall, to protect owners from double paying contractors and subcontractors and to give those who work on or supply materials to a job site, protection that they will be paid. As long as owners and contractors follow the provisions of the statute, each side has protections. Owners know who is working on their property and are assured that the workers are getting paid and liens will be released. Contractors and suppliers have lien protection, evidenced by and relating back to the Notice of Commencement (NOC), no matter when they begin working on the project, so that the owner can’t foreclose out subcontractors and suppliers by taking out a junior mortgage.

But that is not what I want to talk about today. So much is written about Florida construction lien law and the perils associated with not following proper procedure. Instead, I want to focus on the end of construction and the termination of the NOC. When selling or refinancing a property, it is common to find outstanding Notices of Commencement in the title search. These affect the status of title because all contractors, subs and materialmen who worked on the job and who provided notices to owner have lien rights that relate back to the date of the NOC which will have priority over any newly recorded deed or mortgage. Therefore, in order to insure a new owner or mortgage, the NOC must be terminated. But, months later, this could be complicated.

The first thing to do is to check the date of the NOC. Has it expired? Notices of Commencement expire and automatically terminate 1 year after the date of recording (unless an earlier date is set forth in the NOC). If the NOC has expired, let the title company know and it will be deleted from the commitment as it is no longer an issue.

Second, if the NOC has not expired, before closing, you’ll need to obtain and record a Notice of Termination from the owner as well as a final contractor’s affidavit from the general contractor.   The contractor’s affidavit is prescribed by statute, yet many small contractors pretend not to know what they are required to do. The contractor must attest that all work has been completed and all subs and suppliers have been paid and the contractor must satisfy and release its lien. The affidavit should be recorded with the notice of termination. The contractor should also provide waivers of liens from all subs who have provided notices to owner.

Why wouldn’t an owner terminate a NOC when the work is done? Many times, for ordinary home repairs, such as the installation of a new AC unit or a new roof, the home owner doesn’t know to record a termination and the contractor doesn’t tell the owner to do so. That is why this is a common problem. In my own case, I installed a new roof on my house last year. I know that I needed a Notice of Termination and just never got around to it or asked for the contractor’s affidavit. And then, we decided to sell our house. I have had to get the contractor’s affidavit quickly. It wasn’t hard for me because I knew exactly what to do and what to ask for. But a typical homeowner might have had more difficulty.

Third, if construction is on-going and the contractor can’t say the work is complete, closings can still occur, but there are strict rules to follow. When a client is purchasing a condominium, for example, the association might be renovating common areas. In this case there might be multiple NOCs which affect title to all units. While each unit is specially assessed for the renovations, the association is responsible for payment of the work. Therefore, title to an individual unit or a unit mortgage can be insured if you obtain an affidavit from the association stating that the association has sufficient funds available and set aside to complete the work.

Sometimes developers will begin construction work on a site before obtaining construction financing. Therefore, a NOC is already recorded before a mortgage would be recorded. This would make the liens of the contractor and all subs and suppliers superior to the mortgage. Obviously, no lender would close on this bases. To remedy, the NOC has to be terminated, the mortgage recorded and the NOC re-recorded.

But it isn’t that simple. The owner has to pay the contractor for all work completed to that point, including retainage and the contactor must assure that all subs and materialmen are paid to date. That way, the contractor can provide a “final” contractor’s affidavit and release of lien and all subs and suppliers can provide lien waivers. They are final because all subs and suppliers will have been paid for all work rendered. In addition, work on the site must stop for at least 24 hours. Taken together, going forward, the new work is treated as a new contract and a new NOC for the work that will be done after the mortgage is recorded. However, owners don’t like to shut down a job site. To comply with the statute and guard against lost time, we try to close on Fridays so that the shutdown period can occur over the weekend when work isn’t generally scheduled, or only light work would have been scheduled.

With the exception of this final case where a termination and new NOC are required, I would say that most of the time, owners don’t record notices of termination and rely on the 1 year expiration period as they don’t intend on selling or refinancing for more than a year. In commercial practice, this is probably ok because construction loans are usually disbursed on a draw basis following title updates and upon receipt of proper documentation from the contractor and all subs, including upon the final draw. They will have the proper documentation on hand if necessary. However, if you are a homeowner doing a major renovation, it is not a good idea to wait to get the notice of termination, contractors affidavit and lien waivers (my own stupidity notwithstanding). You never know if there is a subcontractor out there who has a dispute with the contractor who will come back and cause you problems. Don’t make that last payment until the contractor can provide the affidavit and lien waivers and you can sign and record a Notice of Termination properly.


The Miami Herald reported last week (See Article HERE) that the Broward Sheriff’s Office has arrested 7 people on more than 600 charges of grand theft and identity theft. The accused allegedly fraudulently took ownership of 44 homes in Broward County, including from the estates of 18 deceased people. The article did not contain a lot of detail but did say that at times, the accused would sell the same house to multiple people and collect payments simultaneously.

We know how easy identity theft is, but how can someone “steal” a house? Unfortunately, it also is too easy. I’m not pretending to know how this ring operated, but fraud and forgery are often simple crimes to perpetrate, particularly when the victim is in financial trouble. Foreclosure rescue scams are one way to fraudulently gain possession of a home. Here, the scammer will approach a debtor in or near foreclosure with promises to bail the debtor out. The scammer will either promise to take over the mortgage payments and allow the debtor to continue to live in the house for a small fee. Or, the scammer will make a small cash payment to the debtor and “pay off” the mortgage. In return, the debtor is to make payments to the scammer. In either case, the debtor is provided with a stack of papers to sign. Instead of a note and mortgage, the debtor signs a deed, but is not told that the house is being transferred.

The mortgage is never satisfied. The debtor makes the new lower “loan” payments to the scammer. Meanwhile, the scammer sells or mortgages the house and walks away with the cash. At some point the original lender, or a new lender or both, or a new “owner” come knocking on the door seeking possession of the house. The debtor thinks he has been paying the new loan and can’t understand why he is being forced out of his house.

Sometimes, in fact often, the scammer has made multiple loans or sales and never records the mortgages or deeds. The scammer has conspired with a title company to allow this to occur. The original owner has no clue that he has signed away ownership rights and soon finds himself in a battle with multiple people claiming ownership and mortgage rights. This scam isn’t really difficult to prevent. Simply read documents that you sign and understand what you are signing. Get a lawyer. The problem is that desperate people take desperate measures and are easy targets.

Forgery is harder to prevent. If someone forges a deed, power of attorney or mortgage it is very difficult to spot after the fact. The successful forger needs a compliant notary and witnesses or access to a notary seal. E-filing and E-recording makes it easier for forgers to succeed. Original documents are no longer presented when presented for E-filing or recording. Thus, a forger need only obtain a decent copy of a previously notarized and witnessed document and then copy and paste a forged signature onto a document. The forger will then have no contact with 3rd parties and the document will look appropriately executed of record.

Forgeries are a prevalent problem in real estate transactions and title companies continue to warn agents to be on the lookout for potentially forged documents, having suffered millions in claims over the last several years. A forged deed can be recorded on any one’s house without knowledge of the owner. The subsequent sale will likely be the one that is the problem. Watch for documents that are recorded where mortgages aren’t satisfied or the notary block is “off”. By off I mean several things: the block could be crooked, the font could be different than the rest of the document or have streaks in it, the county in the jurat might not make sense or the notary’s commission might be expired.

One other common scam is the sale or lease of a home over the internet via a Craig’s List like site, even VRBO or some other lesser known site to a foreigner. Sometime the home may be actually listed and shown on MLS or Zillow or other sites and sometimes the home is randomly selected. In either case, the scammer has just enough information to make it plausible that the lease or sale is real. A friend of mine one time answered his door to find a family of 4 from South America outside with all of their belongings. That had rented his house for 6 months over a site in South America because “Sister Kelly”, my friend’s wife, was on a humanitarian mission to Africa. My friend and Kelly had just married and this was Kelly’s house. That had recently listed the house for sale. Needless to say, Kelly was not a missionary nor in Africa. This family had been scammed and had lost their money. Fortunately for my friend and his wife, they were home when these people arrived. Had they not been home, they may have attempted to break in.

While the threat or someone stealing your house seems remote, it is more common that most would think. So many of these scams are hard to predict and prevent. However, the easiest marks are the financially distressed. As in any case involving fraud, read everything before you sign, as questions and contact an attorney.

I like to think that I am technologically competent. My kids might say otherwise, but in the office, I am pretty 21st century. I have adapted to and adopted the rapidly evolving office and CRE tech. In fact, because I started practicing law in the late 80’s, I actually “grew up” with the technology. I went to college with a typewriter, law school with an Apple IIC and started practice without a computer on my desk. I learned how to use all things tech for the office as it was introduced to the working world – word processing, fax, e-mail and the internet, to name a few. In real estate, I learned how to do closing statements by hand long before there was closing software. We reviewed abstracts before search engines were available.

I could go on, but even I feel like I am old. But I want to make the point that technology has evolved so quickly, that what was new and a time saver one minute, became old and a burden the next minute. Specifically, I reference fax. When fax machines first came to our offices in the early 90’s we thought it was the greatest invention ever. It was so time saving that we instantly hated it. Why? Because where we once had several days to receive and review documents sent to us and received by mail, suddenly, opposing attorneys were calling us within an hour after sending a document by fax to confirm receipt and ask for comments. Somehow, we were supposed to review those shiny, slick pieces of paper instantly, no matter what else we were working on.

As fast as fax machines came about, they also have disappeared, thanks to e-mail, scanning and pdf. Fax has become so uncommon that I don’t even know my fax number anymore. Our fax machine rarely “rings”. While the quality of fax documents is as good as any pdf or e-mail, there is no need for it because of the ability to e-mail right from your desk and have the document arrive on someone else’s desk or phone instantly.

So why is it that some large financial institutions require that we send completed loan packages back to loan administration BY FAX for funding authorization? Or, that we send applications for mortgage modifications or short sale for approval BY FAX? In the last 10 days, we have sent 3 such packages, all more than 100 pages (some close to 200 pages) to large banks by fax. Could there be any more inefficient use of time or inefficient way to transmit documents? Fax just doesn’t work in today’s fast paced business environment. First of all, you still get busy signals from fax machines. When else today can you get a busy signal? We scan the fax in, walk away and come back to check 30-60 minutes later only to find out that large financial institution didn’t receive the fax because the line was busy. The process begins again. Hopefully, by the end of the day, the package will get through.

Remember how often the fax line would either cut off or there would be some kind of blip so that the entire fax wouldn’t go through and then you had to figure out what pages the recipient didn’t get?   Even with digital lines and high quality scanners, this still happens. And, because these faxes go to some general mailbox, there is no one to talk with to determine which pages are missing. Therefore, most of the time, the entire fax has to be resent in which case you run the risk of busy signal or partial fax again. This is a double or triple waste of time and effort.

On that same theme, fax machines used to be monitored full time, at least in big companies and firms. As technology improved, e-fax came about and, in theory, faxes were delivered, like e-mail, directly to the intended recipient. One would think this to be the case with these banks. However, the closers, administrators, underwriters and others, all monitor all files, in theory. They are supposed to pull the files out of the fax box as they come in. Anyone should be able to look at a file and answer a question or authorize funding. In practice, this does not occur. Your closer is your closer. You loan administrator or short sale processor is who you are supposed to deal with. When you send a loan package in for funding, if you can’t e-mail directly and are required to fax to the general number, you have to wait for him/her to find it. Another delay occurs.

Technology is ever advancing. Big companies, like banks and financial institutions, should be at the forefront of the revolution. Fax was a great advancement 25 years ago. But its time has come and gone. So, you know who you are big banks. Get with the times and dump your fax machines!

Negotiating a deal can be a tricky proposition for an attorney. Every attorney wants to do his/her best job and not only assure that the client is adequately protected, but also to try to get the best deal possible for the client.  As to the former, the attorney is and should be given great latitude.  But ultimately, the client will weigh the risks and make the decision.  If the attorney is doing his/her job properly, legal terms will be thoroughly debated, drafted and re-drafted so that the clients can see a nearly final product and the attorney can say “I did the best I could” and explain how the client is protected and where language could be stronger.  That way, the client can make an educated decision as to whether to proceed.

Business terms are another issue. These are the client’s domain.  The client gives parameters that the attorney should negotiate within.  During negotiations, there comes a point when both sides have to have discussions with their clients about which direction to proceed and whether to alter the parameters or terms.  Sometimes, an attorney forgets this role and speaks and acts as if he is the client.  When this happens, your deal can implode.

I recently worked on a future advance loan for a client. For some reason, the bank did not retain the same attorney to close the future advance loan who closed the original loan 2 years prior.  The original loan was an $8.9 million term loan which we amicably negotiated.  We hammered out all of the terms of the original note, mortgage, guaranties and other loan documents with the bank and the original attorney.  Negotiations were tough but fair, and the bank agreed to many of our requests to change standard bank provisions as well as numerous business terms.

The bank’s new attorney for the relatively small future advance ($425,000) did not have this history and it appeared as if he did not read the original loan documents. Clearly, he was not familiar with them because the first draft of the future advance loan documents did not include any of the terms that had been previously negotiated.  The drafts were very much the bank’s original form documents with the new terms of the future advance filled in.   All of the standard objectionable terms that we had negotiated out in the original loan had been re-imposed.  Special provisions that we had negotiated in, were omitted.  In addition, I was not satisfied with the way the attorney proposed to document the new provisions that the bank required for the future advance.  Frankly, he was not documenting the loan as a future advance and loan modification.  As I began to explain my requests, he summarily rejected them as out of hand without discussing them with his client, the bank.

The deal froze in its tracks. The attorney insisted that he was right because the credit approval made no mention of the revisions we had made to the original loan and therefore, he was supposed to amend and restate the loan documents and re-impose the original language.  I was astonished that he would not discuss this interpretation with his client.

By taking this position, he increased the interest rate of the original loan which was not the deal. The future advance interest rate was about 100 basis points higher than the original loan interest rate.  There was no intent on the bank or my client’s part to increase the rate of the original loan.  In addition, each loan was to have a 5 year prepayment penalty, with the penalty decreasing each year.  By amending and restating the loans, the original loan’s prepayment penalty period restarted.  Again, not intended.  Again, the attorney would not listen.  To me, these weren’t even items to negotiate.

To save the deal, I had to have my client intervene directly with the loan officer. Ultimately, the bank accepted every request that I made except one and that one was modified, I believe to appease the attorney.

I am fine when someone makes a mistake as this attorney obviously did. I’m not ok when they refuse to admit it or refuse to go back to the client to see if they did.  This guy, either through arrogance or ignorance decided it was his place to tell me no to every point that I raised.  What’s worse was that he asked me why I was so hostile about everything going on in the deal!  I flat out had to tell him that he was unprepared and that he refused to ask his client about anything I raised.  You can imagine how that went over.  Let’s just say that 4 weeks after closing he is still trying to find “mistakes” that our office made only to find that he remains unprepared and unfamiliar with the language in his own documents.

Attorneys who try to act as the client by making decisions for them and without being thorough and careful, do so at the risk of the deal for their client.

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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