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Sweeney Law, PA Fort Lauderdale Business Lawyer
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Government Liens May Survive Nonjudicial Foreclosures


Many people in the construction industry make money by buying and fixing up foreclosed homes. Sometimes called refurbishing, or flipping, the business can be pretty lucrative if you are in the construction industry, and know what you are doing, and of course, if you buy and flip the right property.

But a new case is something that those in this business should be aware of, and it has to do with the existence and survival of government liens put on properties.

Liens and Lien Priority

In a normal scenario, at least in Florida, when a lienor or lender forecloses on property—say, a senior mortgage or lienholder—all other liens and encumbrances on the property that are inferior (that is, which are filed or recorded afterwards) get wiped out in the foreclosure. That includes, in some cases, some kinds of government liens on property.

That’s largely a matter of due process; inferior lienors get served with the lawsuit, have the chance to defend the lawsuit, or do a number of other things to protect their rights in the property and their lien.

Nonjudicial States

But not all states work like Florida. In some states, lienors can foreclosure without court action—called a nonjudicial foreclosure. In those cases, there is never any “foreclosure case,” the whole foreclosure process happens outside of the court system, but generally has the same ultimate effect as in states like Florida, where foreclosure is an actual lawsuit.

Government Liens May Survive

But in the 8th federal circuit (which does not include Florida, which is in the 11th circuit), a new federal case recently held that government liens cannot be wiped out by a foreclosure even if the government lien was inferior to the foreclosing lien if the foreclosure is nonjudicial. There must be an actual court case.

Effect on Florida Companies and Buyers

But in Florida, there is no nonjudicial foreclosure—so is this even an issue for those buying properties? It depends. It certainly is an issue for those buying and fixing properties in other states, where there may be nonjudicial foreclosures.

Florida also allows non judicial foreclosures in certain, very limited circumstances, like tax deed sales. This is where property is put up for auction to the public, when county property taxes aren’t paid. People bid on the properties at public auction—but there is no foreclosure case.

People who purchase property at a tax deed sale, and where the property has a lien from the government on it, may have to do a separate judicial foreclosure to get rid of the lien. We say “may have to,” because again, the case that said this is not a Florida case—but it is possible a Florida court would follow that ruling, and it is also likely that title insurers will start to require this extra step to insure property.

Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today for help with your business law needs.


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