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Appeals Court Ruling Raises Red Flags for Foreclosure Attorneys

A new appellate ruling is raising red flags for foreclosure attorneys, who say it will dampen investor appetite for distressed properties.

By Natalie Dolce | nataliedolce | | Updated on August 29, 2016
Michael Gelfand, attorney with Gelfand & Arpe in West Palm Beach. Photo: Melanie Bell Michael Gelfand, attorney with Gelfand & Arpe in West Palm Beach.
Photo: Melanie Bell
“Beware all real property litigators,” Gelfand & Arpe partner Michael Gelfand, former chair of the Florida Bar’s real property, probate and trust law section, wrote in a blog entry following last Wednesday’s Fourth District Court of Appeal ruling. “Rarely has this commentator commenced a ‘new decision’ brief with such a warning.” The ruling centered on the application of Florida’s lis pendens statute and held that liens placed on a property after a final foreclosure judgment—but before a judicial sale—are enforceable. In an article, posted by GlobeSt.com sister publication, ALM’s Daily Business Review, attorneys say the implications are far-reaching for investors who risk becoming encumbered by new debts from creditors who don’t participate in the foreclosure process but tack on post-judgment claims. “The impact is that potential bidders will sit out the auction,” Gelfand told the Daily Business Review. “Bids will be artificially low, which will mean more deficiency judgments and owners unable to recognize their equity. If bidders don’t know they’re getting clear title from the final judgment, they aren’t going to bid, or they’ll bid a lower amount.” But attorneys involved in the litigation say the appellate ruling is a victory for claimants looking to preserve claims for contractor debt and other liens arising during the so-called “black-hole” period that could last for years before banks complete foreclosure sales. “We’re very pleased with the results, and we feel that the Fourth DCA has helped clarify a somewhat unclear area of the law,” said Eric Hockman of Weiss Serota Helfman Cole & Bierman in Coral Gables. “It clarifies a huge gap in Florida law that no court has opined on before. We believe this has always been the law in Florida, but we’ve never had a court state it clearly.” Click here to read the full article.

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