Homestead Sweet Homestead? How Code Enforcement Liens Should Be Treated Under the Constitutional Homestead Exemption.
The constitutional provision at issue can be found in Fla. Const. art. X, [section]4, which provides in pertinent part:
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by the nature person: (1) a homestead ...;
The application of this homestead exemption in the context of code enforcement liens begins with the case of Demura v. County of Volusia, 618 So. 2d 754 (Fla. 5th DCA 1993).
In this case, the appellants filed a quiet title action seeking to remove the county's code enforcement lien they believed was clouding the title of alleged homestead property. (2) The court cited the constitutional provision and F.S. [section]162.09(3), which prohibits the foreclosure of a code enforcement lien on homestead property. (3) The cherry that is often picked from this case is the court's finding that the constitutional provision "goes much farther" than the statute in that "no such lien exists as to such homestead property." (4) While this statement could lead one to conclude that code enforcement liens cannot be imposed or recorded against homestead property, a continued reading of the case shows otherwise.
The court's opinion goes on to explain in the very next sentence that because no such lien can exist on homestead property, the mere recording of the code enforcement board order imposing the lien cannot cloud title on the property. (5) Note, the court did not dispute the recording of the order itself. Thus, when the court said "no such lien exists," the court was referring to the lien's existence in theoretical terms, not literal terms. With that said, the court determined that an action to quiet title was not the proper remedy for removing the cloud as there was no cloud to remove by virtue of the property being homestead, assuming that it was. (6) The court allowed the lien to remain recorded on the property and noted that the better remedy was for appellants to first seek a declaratory judgment that the property was, in fact, homestead property. (7) Once that fact was established, then appellants could sell the property free of the lien as the lien has no effect against subsequent purchasers. (8) However, if appellants failed to invest the proceeds of the sale into another homestead within a reasonable period of time, those proceeds would lose homestead protection and, thus, could be reached by the county to satisfy the lien. (9) Conversely, if appellants retained ownership of the property, but the property lost its homestead status, then the code enforcement board order that was recorded could be enforced as a lien against the property. (10)
To put it simply, the Demura court opined that a code enforcement lien recorded against homestead property theoretically ceases to exist, and is, thus, unenforceable, unless homestead protection ceases to exist. Once that happens, the recorded lien becomes enforceable. It's important to note the court did not rule that if the property is indeed homestead, then the county's recorded lien should be released.
The Florida Supreme Court would later uphold this rule of law in Ilkanic v. City of Ft. Lauderdale, 705 So. 2d 1371 (Fla. 1998), and cite Demura for the proposition that the homestead exemption only prohibits the forced sale of homestead property and does not prohibit the imposition of a lien. The court applied Demura to the imposition of a civil restitution lien on homestead property and discounted appellant's contention that such imposition violated the constitutional provision. (11)
Over the next decade or so, the rule of law in Demura would be further clarified in subsequent cases. For instance, in Miskin v. City of Ft. Lauderdale, 661 So. 2d 415 (Fla. 4th DCA 1995), the court seemed to take Demura a step further and declared that the constitutional provision does not invalidate the city's lien as appellant claimed, but merely takes priority over the lien and renders it unenforceable. The court pointed out that the legislature recognized this fact when it drafted F.S. [section]162.09(3), wherein it states that a code enforcement order (12) should not be considered a judgment except in enforcement proceedings. (13) Thus, the court affirmed the trial court's entry of summary judgment in favor of the city, finding that the recorded lien on homestead property remained valid, but was unenforceable as long as the property, or the proceeds from the sale thereof, maintained homestead status. (14) Like Demura, the court did not rule that the city's recorded lien should be released.
If the lien is not released, then what is the remedy for a homestead property owner who has a code enforcement lien recorded against the property? The answer may lie in Prieto v. Eastern Nat'l Bank, 719 So. 2d 1264 (Fla. 3d DCA 1998). In this case, the bank recorded a judgment lien against all real property owned by the appellants, which included homestead property. (15) The appellants sought a declaration that the bank's recorded judgment did not otherwise constitute a lien on their homestead property. Citing Demura, the court first determined that the recorded judgment lien did not "operate as a lien" on appellants' homestead property. (16) Next, the court concluded that the appellants' action--seeking a declaration that the bank's recorded judgment did not otherwise constitute a lien on their homestead property--was the correct remedy. (17)
However, in discussing the consequences to having a lien imposed against homestead property, the court's choice of words seem to provide another "cherry" for those who argue that the recording of such liens violate the constitutional provision. The court pointed out that despite constitutional immunity granted for homestead property, "it does not alter the appearance of a valid lien on the property" to parties who are not aware that the property is homestead, and, thus, such appearance may impair the property owner's ability to attract a buyer for the property or obtain a loan. (18) The court concluded that this situation could be remedied in two ways: 1) by a declaration that the recorded judgment did not otherwise constitute a lien on the property; or 2) by bringing some other equitable action that would "remove any appearances that a judgment lien is valid and/or effectual." (19) Although this case is instructive on the proper remedy to utilize, the court used the word "valid" instead of "enforceable." Hence, the implication is that a judgment lien imposed on homestead property is invalid. This is contrary to the rulings in Demura and Miskin, which concluded that the lien's validity remains intact--the lien is just unenforceable. Two years later, this same court would hold in Monroe County v. McCormick, 752 So. 2d 1239, 1240 (Fla. 3d DCA 2000), that the validity of a code enforcement lien imposed against homestead property remained intact and that, although the lien was unenforceable against homestead property, the lien was enforceable against personal property.
It is worth noting that in all these cases, the remedy suggested by the courts was never to remove the lien from the property. Indeed, it makes sense that such liens remain recorded on the property; how else can the lien become enforceable in the event homestead protection is lost? It seems improbable that a city or county would have the ability and resources to lie in wait for every homestead property to lose its status so it can record its lien. Furthermore, if a homestead property is sold and the proceeds from the sale are not reinvested in another homestead, the law allows for creditors to enforce their liens against the proceeds. (20) If the local government was not permitted to maintain a recorded lien on the homestead property, it would have no mechanism to seek payment. Moreover, if the local government had to wait until such time the property or the proceeds lost homestead protection before it could record its lien, then under the "first in time, first in right" principal derived from Florida's recording statute, (21) it is probable the government would be paid little or not at all because its lien would most likely be recorded well after other creditors' liens that would hold a superior position. (22)
This point is illustrated in the case of Town of Lake Park v. Grimes, 963 So. 2d 940 (Fla. 4th DCA 2007). In this case, the court concluded that because former owners of homestead property did not have a good-faith intention to reinvest proceeds they received from the foreclosure sale of their property in another homestead, the proceeds lost its homestead protection. (23) Therefore, the town was entitled to the proceeds for payment toward its code enforcement liens that were currently recorded against the property. (24) The court stated that although the homestead exemption must be liberally construed in the interest of protecting the family home, it must not be so liberally construed as to make it an instrument of fraud or imposition on creditors. (25) Thus, it seems clear that construing the constitutional provision to the point of ordering the release of the code enforcement lien or prohibiting the recording of the lien until homestead protection is lost would be a great imposition on local governments that need to not only preserve an interest in the property by recording the lien, but also provide notice to any subsequent purchasers that code violations may exist on the property. (26)
Up to this point, the caselaw on this issue seems clear until another "cherry" is made available for picking--this time by a court's seemingly misplaced reliance on a family law case. In Fong v. Town of Bay Harbor Islands, 864 So. 2d 76 (Fla. 3d DCA 2003), the town filed an action seeking to foreclose a code enforcement lien on real and personal property. The trial court granted the town's cross-motion for summary judgment, finding that the town may levy against all property, except property that is deemed homestead, and that the lien could remain on the property in the event such property loses its homestead status. (27) On appeal, the court concluded that the constitutional provision prohibited the town from even imposing the lien based upon the decision in Robles v. Robles, 860 So. 2d 1014 (Fla. 3d DCA 2003). The problem with the court's reliance on Robles is that it did not involve a code enforcement lien but rather an equitable lien that was imposed for nonpayment of alimony. (28) It is well-settled in the world of equitable liens that absent a showing of fraud or egregious conduct, this type of lien cannot be imposed against homestead property. (29) Thus, the court in Robles ruled that an equitable lien could not be imposed against the husband's homestead property because certain factors were not proven; namely that the husband engaged in fraudulent or egregious conduct that improperly interfered with the former wife's ability to recover her alimony payments. (30) Therefore, the Robles court ordered the lien be vacated. (31)
Because Robles involved an equitable lien, which is governed under a very different set of rules than code enforcement liens, (32) the Fong court's reliance on Robles appears to be misplaced. In fact, the court reached this conclusion despite the Florida Supreme Court's 1998 ruling in Ilkanic that judgment liens can be imposed on homestead property. To add to the confusion, the court in Fong then goes on to cite Demura and Miskin in stating that if the property, or the proceeds from the sale thereof, should lose its homestead status, then the town's order could be enforced as a lien against the property. With that said, we are left with a decision that is somewhat confusing by its apparent contradiction, thus, offering another "cherry" for opponents to pick as to the validity of code enforcement liens. However, when this case is examined more closely, that cherry appears rather sour.
Notably, the statutory language governing code enforcement liens unmistakably supports the courts' rulings that such liens can be imposed against homestead property. In particular, F.S. [section]162.09(3) (emphasis added) states in pertinent part:
A certified copy of an order imposing a fine ... may be recorded in the public records and thereafter shall constitute a lien.... Upon petition to the circuit court, such order shall be enforceable in the same manner as a court judgment by the sheriffs of this state.but such order shall not be deemed to be a court judgment except for enforcement purposes.... No lien created pursuant to the provisions of this part may be foreclosed on real property which is a homestead under [[section]]4, [a]rt. X of the [s]tate [c]onstitution.
Keeping in mind the fundamental principle that a statute should not be interpreted in such a way as to render other provisions of the statute superfluous, (33) [section]162.09(3) explicitly references the constitutional homestead exemption after discussing the recording procedure that establishes code enforcement orders as liens. Thus, the language establishing the procedure for a code enforcement order to constitute a lien would be superfluous if the constitutional provision was intended to completely supersede that procedure. It is clear from the statute's language that a code enforcement order can be recorded against homestead property, but it cannot be enforced as a lien against such property. Any other interpretation would cause the statute to directly contradict the express language of the Florida Constitution. Clearly, this was not the legislature's intent when it amended the statute in 1985, (34) as evidenced by the fact that the statute expressly references the constitutional homestead exemption. Basic rules of statutory construction dictate that laws enact ed by the legislature cannot impair rights afforded in the state's constitution. (35) Therefore, the statutory language authorizing the recording of a code enforcement order has no effect on the constitutionally created homestead exemption. (36)
Application of the Law
If the homestead property owner intends to sell, refinance, or obtain a home equity loan, and there is a code enforcement lien recorded against the property, then it is the owner's responsibility to seek a declaration from a court that the property is in fact homestead and that the code enforcement order does not constitute a lien on the property as long as the property retains its homestead status. If the owner properly obtains this court order, then the local government would be in contempt of that order if it tried to enforce its lien (i.e., foreclosure). Merely re-recording the original lien document or recording an amended lien document does not constitute enforcement. The burden should be on the property owner to demonstrate the unenforceability of the lien to the lending institution or title company. In turn, these entities should know and understand the law as it applies to code enforcement liens; in particular, that these liens are not prohibited. (37)
To get the full picture of code enforcement liens in the context of the constitutional homestead exemption requires a complete reading and understanding of all relevant cases, and a close examination of the statutory language governing these liens. Such scrutiny reveals that, under Florida law, code enforcement orders can be recorded as liens against homestead property and retain their validity; however, such orders are not enforceable as a lien until such time the homestead protection afforded to the property, or to the proceeds from the sale thereof, is lost. If proceeds from the sale of a homestead property lose their immunity, then code enforcement liens attach to the proceeds, even in instances when the sale was involuntary through foreclosure, sheriff's levy, or a tax deed sale. Furthermore, the homestead property owner who has a code enforcement lien recorded against the property has remedies available, but those remedies do not include vacating the lien. Therefore, next time the opposition attempts to cherry-pick the law when arguing against the imposition of a code enforcement lien on homestead property, at least a proper analysis of the relevant caselaw is now available for clarity on the issue.
(1) Cherry Picking, Wikipedia, https:// en.wikipedia.org/wiki/cherry-picking.
(2) Demura, 618 So. 2d at 755
(4) Id. at 756.
(6) Id. at 756-57.
(8) Id. at 756.
(11) Ilkanic, 705 So. 2d at 1373.
(12) Rendered by either a code enforcement board or special magistrate under F.S. Ch. 162.
(13) Miskin, 661 So. 2d at 416.
(15) Prieto, 719 So. 2d at 1265.
(16) Id. at 1266.
(20) Demura, 618 So. 2d at 756.
(21) See FLA. STAT. [section]695.11 (2015).
(22) Id. See also FLA. STAT. [section]695.01 (2015).
(23) Grimes, 963 So. 2d at 943-44.
(25) Id. at 942. See also Havoco of America, Ltd. v. Hill, 790 So. 2d 1018, 1020 (Fla. 2001).
(26) See FLA. STAT. [section]162.07(4); see also Monroe County v. Whispering Pines Associates, 697 So. 2d 873 (Fla. 3d DCA 1997) (code violations "run with the land" so any subsequent purchasers can be held responsible for bringing the property into compliance).
(27) Fong, 864 So. 2d at 78.
(29) See Havoco of America, Ltd. v. Hill, 790 So. 2d at 1028 (stating that equitable liens are permissible against homestead property in cases in which the property owner has used funds from fraud or egregious conduct to either invest in, purchase, or improve the homestead).
(30) Robles, 860 So. 2d at 1015.
(31) Id. at 1016.
(32) This was later clarified in Pelecanos v. City of Hallandale Beach, 914 So. 2d 1044 (Fla. 4th DCA 2005) (finding that municipal code liens could not be imposed as equitable liens).
(33) See Murray v. Mariner Health, 994 So. 2d 1051, 1061 (Fla. 2008); see, e.g., Dep't of Revenue ex rel. Stephens v. Boswell, 915 So. 2d 717,722 (Fla. 5th DCA 2005) (court validated the statutory interpretation that gave effect to all the rule's provisions).
(34) Section 162.09 was originally [section]166.059.
(35) See Havoco, 790 So. 2d at 1029.
(36) See id.
(37) The Fund, Title Notes, TN 16.04.03 (2015) (citing Demura and Fong for the incorrect proposition that the creation of code enforcement liens against homestead property is prohibited).
Victoria Cecil Walker is an assistant city attorney with the City of Orlando. She received her J.D. from Stetson University College of Law. Her concentration is in appellate matters involving the City of Orlando Code Enforcement Board, and she counsels the city's code enforcement division on various legal matters. She thanks Alvis L. Horne, Jr., a third-year student at the Dwayne O. Andreas School of Law at Barry University, for his assistance.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Andrew O'Malley, chair, and Douglas G. Christy and Jeff Goethe, editors.
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|Author:||Walker, Victoria Cecil|
|Publication:||Florida Bar Journal|
|Date:||Jul 1, 2017|
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