Our Firm Successfully Argues Law Allowing Seizure of Rents Cannot Apply to Our Client
We are proud to announce that our firm recently won a major battle in state court by successfully arguing that a portion of Florida foreclosure law was illegal under the Florida Constitution. The fight is likely not over, but this is a big step in asserting consumer and homeowner’s rights.
The Law Allowing Rent Seizures
The law requires that when there is a foreclosure of property that is not residential (which usually means property that is being rented), a foreclosing plaintiff can “fast track” a foreclosure by requesting the court order that all rents received from the property be deposited to the court registry while the case is going on (there is a similar process for residential foreclosures, where a lender can fast-track a foreclosure, that was not an issue in our case).
This process deprives the property owner of the benefit of the rents while the case is being litigated, and thus, puts pressure on the property owner to just surrender the property. If the owner does not comply with a court order to seize the rent money, the property can be taken by the lender.
Documents Don’t Provide for the Remedy
Sometimes, the documents signed when the property is purchased also require that rents be surrendered, but other times they do not. In our case, the mortgage paperwork did not give the lender this right. However, the lender filed for foreclosure and asked the court to take the rents, based on the language of the statute.
The problem with the lender’s request is that the Florida Constitution provides that no law can retroactively impair a party’s contractual rights. So, for example, if you have a contract to paint your neighbor’s house, the legislature cannot then pass a law making painting houses illegal and have it apply to you.
In our case, the homeowner signed contracts with the lender that did not include the right to take rents. This contract is a bargained for exchange between the lender and the borrower. By enforcing the law as to the homeowner, the court found that the law interjected a new term into the existing contract–the ability to take rents upon non-payment–that was never agreed to by the parties, thus violating the parties pre-existing contractual rights in violation of the Florida Constitution.
Fight Will Likely Continue
It is likely that the matter may be appealed, and thus, the fight is likely not over. Additionally, if the ruling stands, it will only provide some relief to those with contracts that existed before the law was passed in 1993. Still, it is a significant win for owners of nonresidential property when lenders try to take their rents before any kind of judgment is even entered.
Are you in foreclosure and have questions about your rights and defenses? Contact Jacobs Legal to speak with one of our Miami consumer rights attorneys today.