Judgment Liens on Real Property: Recent Decision Causes Uncertainty for Title Companies, Bankers, and Lawyers
What did the legislature intend by prescribing a 10-year period with an option to renew concerning judgment liens on real property? A recent decision gives wider latitude to creditors and puts bankers, title companies, and real estate lawyers in a quandary.
Statute of limitations sub-periods for judgment liens on real property were first prescribed by the Florida Legislature in 1987. The italicized language below was added to F.S. §55.10 as follows:
(1) A judgment. . . becomes a lien on real estate … when a certified copy of it is recorded in the official records. . . of the county. . . [in which the property is located]. . . . And it shall be a lien for a period of 7 years from the date of the recording.
(2) The lien…in subsection (1) may be extended for an additional period of 7 years by re-recording a certified copy of the judgment. . . within the 90-day period preceding the expiration of the lien provided for in subsection (1).
(3) In the event the lien is extended under subsection (2), the lien of the judgment. . . may be further extended by re-recording a certified copy of it within the 90-day period preceding the expiration of the lien provided for in subsection (2).
(4) In no event shall the lien upon real property created by subsections (1), (2), and (3) be extended beyond the period provided for in s. 55.081 [20 years].1
The current statute retains the seven-year period for judgments recorded between July 1, 1987 and June 30, 1994,2 but for judgments recorded after June 30, 1994, the initial period shall be 10 years.3 A lien may be extended for an additional 10 years by rerecording a certified copy of the judgment, prior to the expiration of the lien.4
Until recently, this statute provided clear guidance for Florida lenders and title companies. However, a recent Fourth District Court of Appeal decision, if adopted by the other district courts, has the capability to turn the lending industry in Florida upside down. Historically, title companies and lenders ignored judgment liens that were greater than 10 years old as beyond the sub-statute of limitations and their underwriting guidelines instructed underwriters that any judgment lien not renewed prior to expiration could no longer be a lien on real property. Today, hundreds of millions of dollars of Florida title policies are now suspect; now revitalized, once expired liens may prevent homeowners from being able to refinance or sell their homes.
In Franklin Financial v. White, 932 So. 2d 434 (Fla. 4th DCA 2006), the judgment lien in question, either 1) did not previously exist because a certified copy of the judgment was not properly recorded, or 2) the judgment lien had expired, not having been re-recorded prior to expiration.5 The court determined that the statute was silent concerning whether a judgment could be re-recorded after the expiration of the initial seven-year or 10-year period.6 The court then chose to view the statute’s requirement of rerecording prior to the expiration of the lien, not as a prerequisite to having a lien at all or a sub-statute of limitations, but merely as an error for which the only consequence was a possible loss of priority to other liens.7
Under the court’s analysis, recording a certified copy of a judgment creates a lien on real property at any time within the 20-year period following final judgment. In other words, a certified copy of a judgment could initially be recorded in year 19, or it could be re-recorded and become a lien again at any time after the initial 10-year period has expired.
As mentioned initially, this decision creates problems for title companies, banks, and real estate owners where judgment liens that were once thought expired, are given new life. And so we ask, why did the legislature enact seven-year, and later, 10-year renewal periods at all? Why didn’t they simply say that recording a certified copy of the judgment would be lien on real property for 20 years?
A review of the legislative history indicates that the 1987 amendment to §55.10 was intended to shorten the 20-year statute of limitations contained in §55.081 for liens that were not re-recorded prior to expiration of the seven-year period.8 Further, the Legislative History Public Purpose Statement indicates that shortening the statute of limitations to seven-year periods 1) brings Florida in line with the majority of other states; 2) reduces transaction costs to the public by not having to examine a 20-year record; 3) reduces county clerk record-keeping requirements; and 4) relieves debtors from less than diligent creditors.9 In this regard, the original legislative history is completely incongruous to the Franklin decision.
The legislative history for the most recent version of F.S. §55.10 summarizes the proposed changes as revising “the initial recording and re-recording period for a judgment lien on real property from [seven] years to 10 years.”10 In other words, to be a lien on real property, a certified copy must be “initially recorded” within 10 years from the date of the judgment, and must be renewed prior to expiration in order to continue to be a lien on real property.
The report goes on to describe the pre-2000 law as follows: A judgment lien can be effective for up to 20 years from the time judgment was rendered, and in order to maintain a valid judgment lien on real estate during the 20-year period, the judgment must be re-recorded every seven years up to the 20-year maximum.11 The report indicates that the effect of the proposed changes is to revise the validrecording periods of a judgment lien on real property from every seven years from the date of last recording to every 10 years.12 Therefore, based on the legislative history, a judgment will serve as a lien on real property only where it is “initially recorded” within 10 years from the date of the judgment itself, and re-recorded “prior to” the expiration of the “initial period.”13
In summary, the statute and legislative history indicate, in order for a judgment to be a lien on real property, one must re-file the lien to avoid the seven-year and 10-year substatute of limitations as a prerequisite to keeping one’s lien. The Franklin decision says, a judgment can still be lien on real property whenever it is re-recorded.
Although Franklin indicates that the statute is unclear concerning the effect of untimely re-recording, the court did not find sufficient conflict or ambiguity which would have triggered a review of the legislative history.14 While it appears that such a review was not part of the court’s analysis in Franklin, a review of the legislative history is required where statutory ambiguity exists, or where the plain text of a statute is in “inescapable conflict” with related provisions.15 In American Home Assur. Co. v. Plaza Materials Corp., 908 So. 2d 360, 367-368 (Fla. 2005), the court concluded that statutory interpretations that render part of the statute meaningless should be avoided, and courts should construe related statutory provisions in harmony with one another.16
While it is impossible to estimate the number or dollar value of the real estate transactions Franklin will impact in the future, it remains to be seen if other district courts will accept or reject Franklin. Whatever the result, the decision will certainly have title companies and bankers scrambling to adjust their underwriting guidelines and increasing their fees and closing costs to account for judgments once labeled “do not resuscitate.”
1 Fla. Stat. §55.10 (1987).
2 Fla. Stat. §55.10(1).
4 Fla. Stat. §55.10(2).
5 Franklin Financial v. White, 932 So. 2d 434, 436-437 (Fla. 4th D.C.A. 2006).
8 State Library and Archives of Florida: Statement of Substantial Changes Contained in Committee Substitute for S.B. 363; Committee or Judiciary-Civil, 1987; and Senate Staff Analysis and Economic Impact Statement, April 20, 1987.
9 State Library and Archives of Florida: Statement of Public Purpose for Amending Fla. Stat §55.10 (1987).
10 Senate Staff Analysis and Economic Impact Statement, CS/SB 392, February 3, 2000.
12 Senate Staff Analysis Statement, CS/SB 392, February 3, 2000, revised February 24, 2000.
14 Franklin Financial v. White, 932 So. 2d 434 (Fla. 4th D.C.A. 2006).
15 American Home Assur. Co. v. Plaza Materials Corp., 908 So. 2d 360, 367-368 (Fla. 2005).
16 Id. at 368.
Benjamin Hillard of DaFonte & Hillard Law Group and Hillard Law Firm, P.A., of St. Petersburg has over of six years of investment banking experience, primarily in the areas of commercial loan acquisitions underwriting, distressed debt, and commercial property acquisitions. He is also a licensed real estate broker, licensed title agent, and former licensed appraiser.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, Melissa Murphy, chair, and William P. Sklar and Richard R. Gans, editors.