A Lexis Practice Advisor
®
Practice Note by
Meghan Serrano, Shumaker, Loop & Kendrick, LLP
Commercial Mortgage Foreclosure (FL)
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Meghan Serrano
When a lender is faced with a defaulted loan secured by a mortgage on commercial real property in Florida, it
may pursue judicial foreclosure of the mortgage. This practice note provides an outline for complying with the
relevant statutes and regulations, state laws, and local rules governing commercial mortgage foreclosures in
Florida. This note is intended to help counsel for the lender ensure that all pre-suit obligations are met to avoid
any delays or defenses to the foreclosure. However, the information contained herein is relevant to the borrower
and its counsel as well.
For guidance on residential mortgage foreclosures in Florida, see Residential Mortgage Foreclosure (FL). For
more on commercial real estate nancing in Florida, see Commercial Real Estate Secured Loans (FL) and Real
Estate Financing (FL).
For Florida mortgage forms, see [Leasehold] Mortgage, Assignment of Leases and Rents, Security Agreement
and Fixture Filing (Acquisition Loan) (FL) and Mortgage (Acquisition Loan, Short Form) (FL).
PRE
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SUIT REQUIREMENTS
A mortgage is security for a debt obligation. As such, it is imperative that you review the mortgage, promissory
note, guaranty, and/or other security instrument to ensure compliance with any contractual pre-suit requirements
contained in these documents.
Notice of Default
Many mortgages include a provision requiring that a mortgagor receive notice of the default, and, sometimes,
an opportunity to cure it. Thus, the rst step for the practitioner is to determine if the lender complied with all
notice provisions, because a lender cannot foreclose unless it has demonstrated compliance with all contractual
obligations. When pre-suit notice is required, it must include all required contents. See Samaroo v. Wells Fargo
Bank, 137 So. 3d 1127 (Fla. Dist. Ct. App. 2014). In Samaroo, the acceleration notice did not include notice of
the right to cure, but the lender refuted the borrower’s armative defense that a proper acceleration notice was
not given, arguing that it “substantially” complied with the contractual notice requirements, an argument the court
rejected. Other cases have found that the mortgagee demonstrated “substantial” compliance with the obligations
of the loan documents where a default notice did not give the required 30 days to cure the default, but the
borrower did not demonstrate any resulting prejudice. See, e.g., Gorel v. Bank of New York Mellon, 165 So. 3d 44,
47 (Fla. Dist. Ct. App. 2015).
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Demand for Rents
Frequently, commercial loans include an assignment of rents as additional security for the loan. If the lender has
such an interest, review it carefully to determine whether the lender may make a demand for rents prior to ling
the foreclosure action. Once the foreclosure action has been led, a lender may apply for an order requiring the
borrower to deposit the rents into the registry of the court or elsewhere as designated by the court. Fla. Stat. Ann.
§ 697.07(4). The court may also require the borrower to account for any rents collected since these amounts were
not paid to the lender. Fla. Stat. Ann. § 697.07(4).
PREPARATION OF THE FORECLOSURE COMPLAINT
Below are some practical considerations for the preparation of the foreclosure complaint to ensure compliance
with Sec. 702.105, Fla. Stat. Ann. and other applicable rules.
Title Search
If all required pre-suit notices have been given and the borrower has failed to cure the default, the next step
is to determine all necessary and proper parties to the foreclosure action. This step requires obtaining a title
report to identify not only ownership and encumbrances but all recorded documents that aect the property,
including condominium or homeowners’ association documents, any other claims such as superior or subordinate
mortgages, and any lien claims, These reports are also valuable because they can identify any title defects or
defects in the mortgage instrument, which can be corrected in the foreclosure action.
Venue and Jurisdiction
Florida’s circuit courts have exclusive original jurisdiction over mortgage foreclosure actions. Fla. Stat. Ann. §
26.012. As for venue, the foreclosure action may be brought in the county where the property is located. Fla.
Stat. Ann. § 47.011. If the mortgaged property lies in more than one county, the foreclosure may be led in either
county. Fla. Stat. Ann. § 702.04.
Statute of Limitations
The statute of limitations for a mortgage foreclosure is ve years under Fla. Stat. Ann. § 95.11(2)(c). The Florida
Supreme Court recently conrmed that each new default can restart the statute of limitations. Bartram v. U.S.
Bank Nat’l Ass’n, 211 So. 3d 1009, 1019 (Fla. 2016).
Necessary Parties
Necessary parties to the foreclosure action include the parties to the note or other loan instrument and the
mortgage, as well as the owner of the property. Cmty. Fed. Sav. & Loan Ass’n of Palm Beaches v. Wright, 452 So.
2d 638, 640 (Fla. Dist. Ct. App. 1984). A foreclosure judgment that does not include the record title owners of the
property at the time the foreclosure action was led is void. Citibank, N.A. v. Villanueva, 174 So. 3d 612 (Fla. Dist.
Ct. App. 2015). Junior lienholders must be included in the foreclosure action in order to extinguish their interests.
Conversely, senior lienholders are not necessary parties because the foreclosure of a junior lien does not aect
their interest.
Tenants in possession of the mortgaged property are only necessary parties to the foreclosure action if the lender
seeks to extinguish their interests. However, if the tenants are paying rent and the lender seeks to maintain
the lease, the tenants should not be joined as defendants in the foreclosure, such that any party acquiring the
property through a foreclosure sale will take it subject to the tenants’ leasehold interests.
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Standing
The foreclosure complaint must establish that the plainti has standing at the time the foreclosure is led. Am.
Home Mortgage Servicing, Inc. v. Bednarek, 132 So. 3d 1222, 1223 (Fla. Dist. Ct. App. 2014), citing McLean
v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. Dist. Ct. App. 2012). “A plainti who is not the
original lender may establish standing to foreclose a mortgage loan by submitting a note with a blank or special
endorsement, an assignment of the note, or an adavit otherwise proving the plainti’s status as the holder of the
note.” Focht v. Wells Fargo Bank, N.A., 124 So. 3d 308, 310 (Fla. Dist. Ct. App. 2013).
A party may also have standing to le the action as a representative of the lender, consistent with Rule 1.210 of
the Florida Rules of Civil Procedure, which permits an action to be prosecuted in the name of someone other
than but acting for the real party in interest. Fla. R. Civ. P. 1.210. Thus, “[a loan] servicer that is not the holder of
the note may have standing to commence a foreclosure action on behalf of the real party in interest, but it must
present evidence, such as an adavit or a pooling and servicing agreement, demonstrating that the real party in
interest granted the servicer authority to enforce the note.” Rodriguez v. Wells Fargo Bank, N.A., 178 So. 3d 62,
63 (Fla. Dist. Ct. App. 2015) (citations omitted).
Attachment of Copies of Loan Documents
Copies of the note and mortgage must be attached to the complaint as exhibits. Fla. R. Civ. P. 1.130(c).
Any instruments, including assignments, that demonstrate standing should also be attached as exhibits.
Sometimes loan documents will include information, including Social Security or bank account numbers, that is
condential pursuant to Rule 2.420 of the Rules of Judicial Administration. If any of the loan documents include
this information, it should be redacted prior to ling copies and if the originals must be led, the procedure to
designate this information as condential must be followed. Fla. R. Jud. Admin. 2.420(d).
Verication of the Foreclosure Complaint
Recent amendments to Florida’s Rules of Civil Procedure require that complaints for foreclosure of mortgages
“on residential real property, including individual units of condominiums and cooperatives designed principally
for occupation by one to four families” be veried. Fla. R. Civ. P. 1.110(b). Although verication is not required for
foreclosure of commercial property, verifying the complaint allows the lender to take advantage of the statutory
show cause procedures found in Fla. Stat. Ann. § 702.105. Rule 1.110(b) does not preclude the verication of
a foreclosure complaint by an employee of the plainti bank’s loan servicer. U.S. Bank N.A. v. Marion, 122 So.
3d 398, 399 (Fla. Dist. Ct. App. 2013). Caselaw interpreting the rule notes that the verication does not need
to include any information about the signer’s authority to verify the complaint. Deutsche Bank Nat. Trust Co. v.
Plageman, 133 So. 3d 1199, 1202 (Fla. Dist. Ct. App. 2014).
The complaint must include allegations regarding the basis for plainti’s standing, the default, the amounts owed,
and the location of the original promissory note, if applicable. The form of the foreclosure complaint for residential
mortgages is set forth in Fla. R. Civ. P. 1.115 and Fla. R. Civ. P. Forms 1.944(a) (for use when the location of
the original promissory note is known) and 1.944(b) (for use when the location of the original promissory note
is unknown). These forms may be used to prepare a commercial foreclosure complaint to ensure that all the
requisite elements of the foreclosure complaint are alleged in this pleading.
Certication regarding Possession of Original Promissory Note
If the plainti has physical possession of the original promissory note, it is required to le a certication with the
court stating (1) that it has possession of the original promissory note, (2) the physical location of the promissory
note, (3) the names and titles of those signing the certication, and (4) the date and time the location of the
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promissory note was veried. Fla. R. Civ. P. 1.115(c). Although this rule applies to residential mortgages by its
terms, by including a certication in the commercial case, the plainti can preempt any defense regarding the
failure to make allegations regarding the location of the original promissory note. A promissory note is a negotiable
instrument and therefore the original is required. Fla. Stat. Ann. § 673.1041.
Lines of credit may also be secured by mortgages and are frequently used in the commercial context. Lines of
credit do not t the statutory denition of a negotiable instrument since they are not for a “xed amount of money”
(i.e., a principal balance) but instead include a “draw” amount. Third Fed. Sav. & Loan Ass’n of Cleveland v.
Koulouvaris, 247 So. 3d 652, 655 (Fla. Dist. Ct. App. 2018); Chuchian v. Situs Invs., LLC, 219 So. 3d 992, 993
(Fla. Dist. Ct. App. 2017). Because these instruments are not negotiable instruments, the original note need not
be produced.
Lost or Destroyed Promissory Notes
If the complaint is based upon an instrument that has been lost or destroyed, the plainti must le an adavit
attached to the complaint detailing a clear chain of all endorsements or assignments of the note, setting forth facts
showing that the plainti is entitled to enforce the lost or destroyed note pursuant to Fla. Stat. Ann. § 673.3091
and include copies of the note, any allonges to the note, audit reports showing physical receipt of the original
note, or other evidence of acquisition and possession of the note as exhibits. See Fla. R. Civ. P. 1.115(d).
If the complaint is based on a promissory note that has been lost, the complaint should also include a claim to re-
establish it pursuant to Fla. Stat. Ann. § 71.011.
Reformation
If the loan documents include any errors such as an incorrect party name or incorrect property description, the
foreclosure complaint should include a count to reform the instrument. Because a mortgage foreclosure is an
equitable proceeding, reformation is permitted in order to reect the true intent of the parties.
For complaint forms, see Mortgage Foreclosure Complaint (Location of Promissory Note Known) (FL) and
Mortgage Foreclosure Complaint (Location of Original Note Unknown) (FL).
LIS PENDENS
As part of the foreclosure, the plainti should prepare a notice of lis pendens for recording in the public records
in the county where the property that is the subject of the foreclosure action is located. See Loidl v. I & E Group,
Inc., 927 So. 2d 1016, 1018 (Fla. Dist. Ct. App. 2006). Pursuant to Fla. Stat. Ann. § 48.23(c)(1)(b), a notice of
lis pendens must contain “The date of the institution of the action, the date of the clerk’s electronic receipt, or
the case number of the action.” Fla. R. Civ. P. Form 1.918 states “NOTE: This form is not to be recorded without
the clerk’s case number.” The procedures used to record the lis pendens with the case number vary widely
between the dierent clerk’s oces around the state. One way to ensure that the lis pendens includes the case
number is to le the complaint rst, then once the new case number is assigned, include it in the lis pendens to
be led immediately thereafter. You should conrm that the clerk in the county where the action is pending will
automatically record the lis pendens upon ling in the case, because not all counties follow the same procedure.
It is imperative to record the lis pendens as soon as possible because once the notice of lis pendens is recorded,
any holders of unrecorded interests must intervene in the case within 20 days, otherwise their rights are
extinguished. See Adhin v. First Horizon Home Loans, 44 So. 3d 1245, 1254 (Fla. Dist. Ct. App. 2010).
After the lis pendens is recorded, the foreclosure plainti’s attorney should run a title search on the gap period
covering the time between the last title search used to prepare the complaint and the date of recording the lis
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pendens. If any parties acquired an interest in the property during this period, they should be joined as defendants
in the foreclosure action in order to foreclose their interest in the property.
For a form, see Notice of Lis Pendens (Foreclosure) (FL).
SERVICE OF THE FORECLOSURE COMPLAINT
All defendants joined in the foreclosure action must be served with process pursuant to Fla. Stat. Ann. § 48.031.
Forms of summons are set forth in Fla. R. Civ. P. Form 1.902. In a foreclosure action, the summons should list all
documents, in addition to the foreclosure complaint, that are being served on the defendant. During the peak of
the foreclosure crisis in Florida, many judicial circuits adopted administrative orders requiring certain notices be
served on foreclosure defendants. As such, you must carefully check the rules in the county where the foreclosure
is being led to ensure compliance with these rules.
Personal or substitute service is permitted under Florida law. Florida’s long-arm statute, Fla. Stat. Ann. §
48.193(1)(c), provides that a person who holds a mortgage or owns real estate in Florida is subject to the
jurisdiction of a Florida court.
When the process server prepares the return of service, conrm that all required information is included on the
service return so that you can follow up if necessary while the service encounter is still fresh in his or her mind.
The service statutes are strictly construed. If a return of service is defective on its face because it does not satisfy
one of the statutory requirements under Fla. Stat. Ann. § 48.031, the defendant is relieved from presenting
evidence to overcome the presumption of validity and the burden shifts to the plainti to prove valid service.
Service is defective on its face when the processor includes the wrong date of service, when the documents
served are not initialed, or when the name of the person being served is omitted.
For a form, see Summons (Foreclosure) (FL).
If personal or substitute service cannot be obtained, a foreclosure defendant may be served by publication only
if the plainti makes repeated attempts at personal service and a diligent search and inquiry for other locations
where the defendant might be located. Fla. Stat. Ann. § 49.021. This search must include all areas of inquiry set
forth in an adavit outlined in Fla. R. Civ. P. Form 1.924.
For a form, see Adavit of Diligent Search and Inquiry (Foreclosure) (FL).
SHOW CAUSE PROCEDURES
Recent amendments to the foreclosure statutes expanded the statutory show cause procedures available under
Fla. Stat. Ann. § 702.10. Any lienholder who has a lien on property that is not occupied by its owner may use
the show cause procedures, which require the ling of a veried complaint, and expedite entry of a foreclosure
judgment. After a complaint and a request for an order to show cause is led, the court will immediately review the
request without a hearing. If the court nds that the complaint is veried, complies with Fla. Stat. Ann. § 702.015,
and alleges a cause of action, the court shall issue an order directing the named defendant in the action to show
cause why a nal judgment of foreclosure should not be entered. A defending party may “show cause” why a
foreclosure judgment should not be entered by ling defenses that “raise a genuine issue of material fact which
would preclude entry of summary judgment or otherwise constitute a legal defense to foreclosure, such action
constitutes cause and precludes the entry of a nal judgment at the hearing to show cause.” Fla. Stat. Ann. §
702.10(1)(b). A defendant who fails to assert any defenses or to appear at the hearing to show cause waives its
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right to be heard and the court “shall promptly enter a nal judgment of foreclosure” provided that the plainti has
met certain conditions. Fla. Stat. Ann. § 702.10(1)(d).
The foreclosing plainti may seek additional relief in the form of a show cause order. Under Florida Statute, §
702.10(2) mortgagees may request a court to order mortgagors to make payments or vacate the property while a
foreclose action is pending.
For a form, see Order to Show Cause (Commercial Foreclosure) (FL).
RECEIVERSHIPS
In Florida, “a receiver is typically appointed in foreclosure proceedings to preserve the status quo, preserve the
property, and collect and apply rents and prots to the payment of the mortgage.” DeSilva v. First Community
Bank of Am., 42 So. 3d 285 (Fla. Dist. Ct. App. 2010). Commercial loan documents frequently provide for the
appointment of a receiver following a default under the terms of the loan documents. Even where such provisions
provide for the appointment of a receiver without notice, courts have been reluctant to do so absent a veried
showing establishing that all requisite elements of Rule 1.610 (governing ex-parte injunction cases) have been
established, including the threat of immediate irreparable injury occurring before notice can be given. See DeSilva
at 289.
Recent cases addressing receiverships have claried the standards governing the appointment of a receiver and
the burden of proof in an action seeking the appointment. In general, these cases have not required any showing
of waste by the borrower or impairment of collateral and instead focused on the likelihood of success on the
merits. Keybank, N.A. v. Kauth, Ltd., 15 So. 3d 939 (Fla. Dist. Ct. App. 2009). In Keybank, the court rejected the
borrower’s argument that the lender was obligated to demonstrate that the value of the property was insucient to
cover the debt secured by the mortgage, stating “this places the burden on the wrong party.”
The scope of the receiver’s authority is governed by the facts at hand. Typically, the receiver is permitted to
manage and secure the property and collect rents. A bond will usually be required and in cases where the
property is generating income, the bond should be sucient to cover any losses resulting from the receiver’s
actions. Where the loan documents address the appointment of a receiver and the authority granted to the
receiver by the court is consistent with the terms of the loan documents, the appointment is likely to be upheld.
Crestview II v. TotalBank, 87 So. 3d 10 (Fla. Dist. Ct. App. 2012).
DEFENSES IN FORECLOSURE
A foreclosure defendant must present any defenses to the foreclosure in its answer, because armative defenses
are waived if not pled. Jojo’s Clubhouse, Inc. v. DBR Asset Management, Inc., 860 So. 2d 503, 504 (Fla. Dist.
Ct. App. 2003). The defendant has the burden of proof with respect to any defense asserted. Some of the most
frequently raised armative defenses in the commercial foreclosure context are explained below.
Lack of Notice
To defeat a defense regarding lack of required notice, a demand letter must be authenticated by someone with
personal knowledge of its contents and authenticity, or by someone who can identify the record as a business
record that ts within the hearsay exception set forth in Fla. Stat. Ann. § 90.803(6). To defeat this defense, the
lender must also demonstrate that the notice included all provisions required in the loan documents. See Notice of
Default section under Pre-suit Requirements.
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Estoppel and Waiver
Several recent cases have addressed situations in which a borrower asserted a defense of estoppel or waiver
after a lender orally agreed to and/or accepted reduced mortgage payments. Most loan documents include non-
waiver provisions, and the Banking Statute of Frauds (Fla. Stat. Ann. § 687.0304(2)), provides that “[a] debtor
may not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration,
sets forth the relevant terms and conditions, and is signed by the creditor and debtor.” However, this statute does
not preclude asserting a defense based on an alleged oral modication. When such allegations are suciently
specic and have been relied upon by the borrower, these facts may create a genuine issue of material fact and
defeat summary judgment. Roach v. Totalbank, 85 So. 3d 574 (Fla. Dist. Ct. App. 2012).
Lack of Standing
If the foreclosure plainti is not the original lender, a foreclosure defendant will usually attempt to assert a defense
due to a lack of standing. A promissory note may be enforced be any of the persons listed in Fla. Stat. Ann. §
673.3011, or a holder in due course, see Fla. Stat. Ann. § 673.3021. If a promissory note is endorsed in blank,
this permits it to be enforced by a holder. See, e.g., Stone v. BankUnited, 115 So. 3d 411, 413 (Fla. Dist. Ct. App.
2013) (rejecting argument challenging the plainti’s standing where note was endorsed in blank in light of the
plainti’s testimony demonstrating that it “acquired ownership of the note and mortgage through the purchase and
assumption agreement” with the FDIC).
If the loan is being enforced by a subsequent holder, then the new holder must make eorts to conrm the
accuracy of the prior holder’s records regarding the loan, including any payments and the default. Holt v. Calchas,
LLC, 155 So. 3d 499, 504 (Fla. Dist. Ct. App. 2015) (records from a prior servicer must, of course, have some
indicia of accuracy, either through personal knowledge or a witness).
If a promissory note secured by a mortgage is sold or assigned, the UCC does not require that the mortgage be
formally assigned. Fla. Stat. Ann. § 679.3101. Absent formal assignment of mortgage or delivery, the mortgage in
equity passes as an incident of the debt. Perry v. Fairbanks Capital Corp., 888 So. 2d 725, 726 (Fla. Dist. Ct. App.
2004). See also Harvey v. Deutsche Bank Nat. Trust Co., 69 So. 3d 300, 304 (Fla. Dist. Ct. App. 2011) (holding
that because plainti possessed original note and led it with the circuit court, its standing may be established
from its status as a note holder, regardless of any recorded assignments).
Payment
A borrower may also assert the lack of any default as a defense (i.e., that the borrower has been timely making its
payments as required by the loan documents). Again, the burden of proof as to this defense is on the borrower.
Deese v. Mobley, 392 So. 2d 364, 367 (Fla. Dist. Ct. App. 1981).
Statute of Limitations and Repose
The statute of limitations and the statute of repose are armative defenses that must be pleaded or else they
are waived. Doe v. Hillsborough Cty. Hosp. Auth., 816 So. 2d 262, 264 (Fla. Dist. Ct. App. 2002). The Florida
Supreme Court recently conrmed that each new default can restart the statute of limitations. Bartram v. U.S.
Bank Nat’l Ass’n, 211 So. 3d 1009, 1019 (Fla. 2016).
Unclean Hands
Foreclosure is an equitable proceeding, and a lender can be estopped from foreclosing when the borrower
establishes that the lender has unclean hands. City First Mortg. Corp. v. Barton, 988 So. 2d 82, 85 (Fla. Dist. Ct.
App. 2008), citing Knight Energy Servs., Inc. v. Amoco Oil Co., 660 So. 2d 786, 789 (Fla. Dist. Ct. App. 1995).
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However, “[a] party must prove that he was injured in order for the unclean hands doctrine to apply.” McCollem v.
Chidnese, 832 So. 2d 194, 196 (Fla. Dist. Ct. App. 2002). The defense of unclean hands requires demonstration
of some egregious conduct by the lender. For one of the rare examples where such conduct was found, see
Shahar v. Green Tree Servicing LLC, 125 So. 3d 251 (Fla. Dist. Ct. App. 2013). The failure to comply with the
requirements of the loan documents is not unclean hands. Cong. Park Oce Condos II, LLC v. First-Citizens
Bank & Trust Co., 105 So. 3d 602, 610 (Fla. Dist. Ct. App. 2013).
Usury
Under Fla. Stat. Ann. § 687.03, a contract for the payment of interest upon any loan, advance of money, line of
credit, or forbearance to enforce the collection of any debt, or upon any obligation whatever, at a higher rate of
interest than the equivalent of 18% per annum, simple interest is deemed usurious. If the loan exceeds $500,000
in amount or value, then the applicable statutory section is Fla. Stat. Ann. § 687.071. A usurious contract is
unenforceable according to the provisions of Fla. Stat. Ann. § 687.071(7).
JUDGMENT
When the defendants have failed to le or serve any response to the foreclosure complaint and the clerk has
entered a default against them, you can proceed to a default judgment. If any of the defendants have served a
response and asserted armative defenses, the foreclosing plainti must demonstrate that the defenses are
legally or factually insucient, either via a summary judgment motion with supporting adavits or through a trial.
Summary Judgment
Because mortgage foreclosure is based on a contract, the process lends itself to resolution via summary
judgment pursuant to Fla. R. Civ. P. 1.510. To defeat summary judgment, a foreclosure defendant must
demonstrate that there is a genuine issue of material fact or law that precludes the entry of judgment for the
lender. Any adavits led in opposition to a motion for summary judgment must be based on personal knowledge.
Campbell v. Salman, 384 So. 2d 1331, 1333 (Fla. Dist. Ct. App. 1980) (arming nal summary judgment when
the adavit led in support of an armative defense was based upon information and belief), citing Fla. R. Civ. P.
1.510(e).
If a defendant has asserted armative defenses, the plainti must disprove the defenses or establish their legal
insuciency in order to obtain summary judgment. Pavolini v. Williams, 915 So. 2d 251, 253 (Fla. Dist. Ct. App.
2005).
Surrender of Original Note
To obtain a nal foreclosure judgment where the action is based on a promissory note, the original note must be
surrendered to the court. If the promissory note has been assigned by an allonge, the original allonge must also
be led with the court. Caballero v. U.S. Bank Nat’l Ass’n ex rel. RASC 2006-EMX7, 189 So. 3d 1044, 1045–46
(Fla. Dist. Ct. App. 2016). If any of these original documents include condential information, the procedures to
designate such condential information must be followed when the documents are led with the court. Fla. R. Jud.
Admin. 2.420(d).
Foreclosure Judgment
Form foreclosure judgments are included at Fla. R. Civ. P. Form 1.996(a) and (b). The judgment must include the
total amount due and shall award interest at the statutory rate set forth in Section 55.03, Florida Statute. Unless
the contract expressly provides that a specic interest rate applies post-judgment, the post-judgment interest rate
set forth in Fla. Stat. Ann. § 55.03, shall apply.
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Any sums collected pursuant to a demand for rents must be applied as a credit in the foreclosure judgment. Once
the foreclosure action has been led, a lender may apply for an order requiring the borrower to deposit the rents
into the registry of the court or elsewhere as designated by the court. Fla. Stat. Ann. § 697.07(5).
For forms, see Final Foreclosure Judgment (Original Note in Plainti’s Possession) (FL) and Final Foreclosure
Judgment (Re-Establishment of Note) (FL).
Attorney’s Fees
If the loan documents provide for the recovery of attorney’s fees, these may be awarded in the nal judgment,
and the court must make a determination that the fees are reasonable based on the factors set forth in Florida
Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), as modied by Standard Guaranty v.
Quanstrom, 555 So. 2d 828 (Fla. 1990), and Rule 4-1.5(B) of The Florida Bar of Rules of Professional Conduct
(Fla. Bar Reg. R. 4-1.5). If a default judgment has been entered against the borrower and the note or mortgage
provides for recovery of attorney’s fees, pursuant to Fla. Stat. Ann. § 702.065, “it is not necessary for the court to
hold a hearing or adjudge the requested attorney’s fees to be reasonable if the fees do not exceed 3 percent of
the principal amount owed at the time of ling the complaint[.]”
A defendant is a “prevailing party” for purposes of awarding attorney’s fees when the plainti’s complaint is
dismissed for failure to comply with conditions precedent, failure to prosecute, or when a suit is involuntarily
dismissed due to the failure to comply with a court order. However, where the defendant successfully argues that
the plainti lacks standing to enforce the loan documents and obtains dismissal of the complaint, the successful
defendant is not entitled to recover attorney’s fees pursuant to the same contract under the reciprocal provisions
of Fla. Stat. Ann. § 57.105(7). Bank of New York Mellon Trust Co., N.A. v. Fitzgerald, 215 So. 3d 116 (Fla. Dist. Ct.
App. 2017).
Judgment for Damages with Reservation to Schedule Foreclosure Sale
In Royal Palm Corp. Ctr. Ass’n, Ltd. v. PNC Bank, NA, 89 So. 3d 923 (Fla. Dist. Ct. App. 2012), the court
conrmed, “consistent with the principle that an unsatised money judgment is no bar to a later foreclosure[,]” that
a plainti may obtain a judgment entitling it to foreclosure and defer setting a judicial sale while pursuing monetary
collection against individual obligors. However, a plainti may not do both simultaneously. Farah v. Iberiabank, 47
So. 3d 850 (Fla. Dist. Ct. App. 2010).
Redemption prior to Sale
The borrower in a foreclosure action has a statutory right to redeem the foreclosure judgment by paying all sums
owed any time prior to the foreclosure sale pursuant to Fla. Stat. Ann. § 45.0315.
Appeal
Under Rule 9.110(b) of the Florida Rules of Appellate Procedure, notice of appeal must be led within 30 days of
the rendition from the challenged order. Fla. R. App. P. 9.110(b).
Relief from Judgment
Fla. Stat. Ann. § 702.07 gives the trial court jurisdiction “to rescind, vacate and set aside a decree of foreclosure”;
however, a motion to set aside a nal judgment is still governed by Rule 1.540 of the Florida Rules of Civil
Procedure, which requires some demonstration of mistake, inadvertence, surprise, or excusable neglect.
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Commercial Mortgage Foreclosure (FL)
The Florida Legislature recently enacted Fla. Stat. Ann. § 702.036 to promote the nality of a foreclosure nal
judgment. It provides that so long as the party seeking relief from the nal judgment of foreclose was properly
served, the applicable appeals period has expired, and the property was purchased by a person not aliated with
the foreclosing lender or foreclosed owner, even if a party is successful in reversing a nal judgment and proving
that it was wrongfully foreclosed upon, it is limited to pursuing monetary damages against the lender and cannot
reclaim property once sold to a third party.
FORECLOSURE SALES
The foreclosure judgment must schedule a foreclosure sale, which, pursuant to Fla. Stat. Ann. § 45.031(1)(a), can
be no later than 35 days after the entry of the foreclosure judgment unless the plainti consents.
Bankruptcy
If a borrower les a petition for bankruptcy, the foreclosure sale must be cancelled. “Often, the primary if not the
sole reason for a bankruptcy action is to delay a foreclosure sale for the purpose of gaining extra time to market
or renance the property.” Nemours Found. v. Gauldin, 601 So. 2d 574, 576 (Fla. Dist. Ct. App. 1992).
Postponing Foreclosure Sale
Cancellations, continuances, and postponements of the foreclosure sale are within the discretion of the trial court.
The movant must have accurate and factual reasons to postpone the sale and include the necessary elements
included in the form motion found in Fla. R. Civ. P. Form 1.996(c).
For a motion requesting cancellation of a foreclosure sale, see Motion to Cancel and Reschedule Foreclosure
Sale (FL).
Publication of the Foreclosure Sale
Publication of the foreclosure sale is governed by Fla. Stat. Ann. § 45.031(2), which lists all the items required
to be included in the notice. Notice of sale must be published once a week for two consecutive weeks in a
newspaper of general circulation, as dened in Chapter 50, Florida Statutes (Fla. Stat. Ann. §§ 50.011–50.0711)
published in the county where the sale is to be held. The second publication must be at least ve days before the
sale.
Sale Procedures
A foreclosure sale must be held in accordance with the requirements of Fla. Stat. Ann. § 45.031(3). Many counties
conduct foreclosure sales electronically, which is authorized pursuant to Fla. Stat. Ann. § 45.031(10), and the
requirements for third-party bidders to register bids and submit deposits in advance of the sale vary greatly in the
counties around the state. The clerk conducting the sale is authorized to charge an additional fee up to $70 for
services in conducting or contracting for the electronic sale, on top of the “service charge of $70 for services in
making, recording, and certifying the sale and title, which service charge shall be assessed as costs and shall be
advanced by the plainti before the sale.” Fla. Stat. Ann. § 45.035(1) and (3).
The mortgagee is not obligated to bid at the foreclosure sale and can still move to obtain a deciency judgment
even if it elects not to bid at the sale. Residential Funding Corp. v. Barrera, 762 So. 2d 948, 949 (Fla. Dist. Ct.
App. 2000), citing FDIC v. Circle Bar Ranch, Inc., 450 So. 2d 921 (Fla. Dist. Ct. App. 1984).
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Commercial Mortgage Foreclosure (FL)
The purchaser at a foreclosure sale takes title to the property subject to all matters of which they have notice or
could obtain knowledge of in the exercise of ordinary prudence and caution. U.S. Bank Nat’l Ass’n v. Rios, 166
So. 3d 202 (Fla. Dist. Ct. App. 2015).
Certicate of Sale
After the foreclosure sale, the clerk of court is required to prepare a certicate of sale in the form prescribed by
Fla. Stat. Ann. § 45.031(4).
A borrower’s right of redemption terminates when the certicate of sale is issued following a foreclosure sale,
unless the nal judgment contains a provision to the contrary.
Objections to Foreclosure Sale
An objection to a foreclosure sale must be led within 10 days of the sale to prevent title to the property from
being issued. Fla. Stat. Ann. § 45.031(5). A party seeking to set aside a foreclosure sale must demonstrate that a
judicial sale resulted from some mistake, accident, surprise, misconduct, fraud, or irregularity in the conduct of the
sale, but inadequacy of the bid price does not need to be demonstrated in order to set aside a judicial foreclosure
sale. Arsali v. Chase Home Fin. LLC, 121 So. 3d 511, 518 (Fla. 2013).
A third-party bidder may intervene in the foreclosure action in order to assert or defend against an objection to the
sale. Any other party ling an objection to the sale must serve a copy of the objection upon the third-party bidder
to provide the bidder with due process.
Certicate of Title
Pursuant to Fla. Stat. Ann. § 45.035(5), if no objections are led within 10 days of the foreclosure sale, the clerk
of court must le and serve a certicate of title issuing title to the property to the successful bidder. Upon such
ling, the sale is conrmed “and title to the property shall pass to the purchaser named in the certicate without
the necessity of any further proceedings or instruments.” Fla. Stat. Ann. 45.035(6). The clerk must record the
certicate of title pursuant to Fla. Stat. Ann. § 45.035(6).
Distribution of Proceeds from Sale
If the property is purchased by a third-party bidder at a foreclosure sale, the proceeds of the sale must be
distributed in accordance with the requirements of the nal judgment of foreclosure and Fla. Stat. Ann. §
45.035(7). The clerk is required to le and serve a certicate of the disbursements that will identify any excess
proceeds available for distribution. Any party entitled to a distribution of excess proceeds must le a claim within
60 days of the issuance of the certicate of disbursements. The clerk shall distribute the proceeds in accordance
with the requirements of Fla. Stat. Ann. § 45.032, Florida Statutes. Section 2 of the statute establishes “a
rebuttable legal presumption that the owner of record on the date of the ling of a lis pendens is the person
entitled to surplus funds after payment of subordinate lienholders who have timely led a claim” and includes a
form for an owner to le a claim to the excess proceeds. If no claim to the surplus is made, the clerk is authorized
to appoint a trustee to locate the owner of record entitled to the surplus. Fla. Stat. Ann. § 45.032(3)(c).
Writ of Possession
The purchaser at a foreclosure sale is entitled to possession of the premises from the time title vests in the
purchaser. Neuschatz v. Rabin, 760 So. 2d 1018, 1018 (Fla. Dist. Ct. App. 2000). Therefore, if the foreclosed
owner remains in possession of the property after the certicate of title is issued to the purchaser at the
foreclosure, the purchaser may obtain a writ of possession, and the trial court retains jurisdiction to issue the writ.
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Commercial Mortgage Foreclosure (FL)
Effect of Sale
Under Fla. Stat. Ann. § 45.0315, if a junior lienholder is joined as a defendant in the senior lienholder’s foreclosure
action, the junior lien is terminated upon the ling of the certicate of sale by the clerk of court, not upon the entry
of nal judgment. AG Group Investments, LLC v. All Realty Alliance Corp., 106 So. 3d 950, 952 (Fla. Dist. Ct. App.
2013).
Reforeclosure
If a junior lienholder is inadvertently omitted as a party in a foreclosure action, the plainti may bring an action
for reforeclosure to extinguish the interest. The omitted junior lienholder can defend in the same manner as if the
initial foreclosure had not happened. Marina Funding Group, Inc. v. Peninsula Prop. Holdings, Inc., 950 So. 2d
428, 430 (Fla. Dist. Ct. App. 2007), citing Abdoney v. York, 903 So. 2d 981, 983 (Fla. Dist. Ct. App. 2005).
DEFICIENCY JUDGMENTS
“[A] judgment creditor is entitled to a deciency judgment equal to the total amount listed in the nal judgment of
foreclosure minus the fair market value of the property as of the foreclosure sale date.” Beach Community Bank
v. First Brownsville Co., 85 So. 3d 1119 (Fla. Dist. Ct. App. 2012). The amount bid at the foreclosure sale is not
binding on the trial court in determining whether to grant a deciency. Jonas v. Bar-Jam Corp., 170 So. 2d 479,
480 (Fla. Dist. Ct. App. 1965).
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Learn more
Commercial Mortgage Foreclosure (FL)
Meghan Serrano
Partner, Shumaker, Loop & Kendrick, LLP
Board certied in business litigation by The Florida Bar, Meghan is considered an expert in her eld, practicing in all phases of civil
and business litigation, including performing and analyzing discovery; drafting motions; attending mediations, hearings, and motion
sessions; conducting witness depositions; and preparing for trial and appellate proceedings. Meticulous and hardworking, Meghan
regularly represents businesses, banks, and landlords in both state and federal court at the trial level and on appeal.
Primarily focusing on real-property litigation, Meghan collaborates with her clients and colleagues to develop the strongest possible
strategy to achieve client objectives, whether defensive or oensive, before disputes erupt into expensive and protracted litigation. She
has extensive experience representing lenders in title claims, foreclosures, deciencies, workouts, and REO matters; representing
landlords regarding lease issues, tenant disputes, and eviction actions; and representing investors with respect to acquisitions of
defaulted loans and loan portfolios. She handles real estate broker deposits and commission disputes, and Florida Real Estate
Commission complaints. In addition, Meghan regularly counsels clients regarding alternate methods of dispute resolution.
With a passion for sharing her knowledge, Meghan is a contributing author to the 2016 supplement to Foreclosures in Florida (Lexis
Nexis), which contains information she gained during the Great Recession while working with banks on loan defaults and foreclosure.
In addition, she is in the process of co-authoring the forthcoming 2018 supplement.
Outside the courtroom, Meghan is passionate about and involved in Boys & Girls Clubs of Sarasota County.
