TracyEvans-cBy: Tracy M. Evans, Esq., Associate, Saxon Gilmore & Carraway, P.A.

In the case of U.S. Bank, N.A. v. Grant, et al., the Fourth District Court of Appeal (“Fourth DCA”) recently considered the issue of whether a homeowners association’s lien for unpaid assessments takes priority over the lien of a first mortgage holder.

In Grant, the bank filed a foreclosure based on the borrowers’ default on a 2007 note secured by a mortgage on their property. The homeowners association filed an answer to the complaint, denying that its lien was inferior to the bank’s mortgage. It was undisputed that the bank’s mortgage was recorded prior to the association’s lien, but after the recording of the association’s Declarations of Covenants and Restrictions (the “Declaration”). The Declaration lacked any language providing that a lien for unpaid assessments would be superior to all other liens or any language providing that such a lien would relate back to the date the Declaration was recorded.

In reversing the lower court’s decision entered in the association’s favor, the Fourth DCA determined that the holding in Holly Lake Ass’n v. Federal National Mortgage Ass’n, 660 So.2d 266 (Fla. 1995) controlled. In Holly Lake, the association claimed that its lien had priority over the mortgage because the lien related back to the date the declaration was recorded. The Florida Supreme Court disagreed, finding the “first in time is first in right” rule governs the priority of lien interests. Absent any specific language in the association’s declaration indicating that the lien relates back to the date the declaration was recorded, a prior recorded mortgage lien has priority.

Based on this precedent, the Fourth DCA rejected the association’s argument, holding that the association’s lien did not have priority over the bank’s mortgage based on the lack of relation back language in the Declaration.

Some firms representing associations in the State of Florida have taken a seemingly minimalistic, but likely carefully calculated approach to mortgage foreclosure litigation, generally denying the complaint’s allegations, but otherwise not participating in the litigation until the date of trial. These firms can then take advantage of mass docket foreclosure trials and high volume law firms, blindsiding bank attorneys by asserting arguments of priority at trial, based solely on the plaintiff’s failure to offer any evidence to the contrary. The recent decision in Grant serves to reinforce the precedent set by Holly Lake and provides bank attorneys with the necessary ammunition to successfully combat arguments to the contrary.


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