Code liens are not "superpriority" liens: is it the end of the debate?

Author:Barboza, Annabella
Position:Florida
 
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Recently, the Florida Supreme Court affirmed the Fifth District Court of Appeal's opinion in City of Palm Bay v. Wells Fargo Bank, N.A., Case No. SC11-830, 2013 WL 2096257 (Fla. May 16, 2013), aff'g, 67 So. 3d 271 (Fla. 5th DCA 2011), by finding that a municipal ordinance provision conferring superpriority status to its code enforcement liens is invalid because it conflicts with state law. Therefore, code enforcement liens do not have priority over an earlier recorded mortgage.

In the past, both trial and appellate courts (1) have ruled against local ordinances granting priority to code liens over a prior recorded mortgage. Despite the provisions of F.S. Ch. 162, some local governments continued to claim authority to grant superpriority status to code enforcement liens. Given the foreclosure crisis Florida faces today, local governments increasingly argued that their code enforcement liens were superior to the lien of a prior recorded mortgage. For mortgage lenders, in general, the enactment of such ordinances created new risks in our already fragile mortgage market. Now, with the recent ruling of the Florida Supreme Court, the uncertainty surrounding the appeal of the City of Palm Bay case has come to an end. The court found that "the conflict between the Palm Bay ordinance and state law is a sufficient ground for concluding that the ordinance superpriority provision is invalid." (2) The Supreme Court's decision was based on a conflict preemption analysis.

This article contributes to the discussion and analysis on the city of Palm Bay's ordinance, which granted superpriority status to its code enforcement liens, and how it contravened both state law and the Florida Constitution.

What Are Code Enforcement Liens?

Code enforcement liens are statutory liens created by F.S. Ch. 162. This chapter, also known as the Local Government Code Enforcement Boards Act, (3) provides for a quasi-judicial proceeding for code violations. Specifically, pursuant to Ch. 162, the code enforcement board or a special magistrate must hold a formal hearing on the alleged code violation, which includes presentation of testimony, evidence, and arguments prior to any action imposing fines or affecting individual rights. Code enforcement proceedings must follow fundamental due process requirements, (4) i.e., the respondent must receive notice and an opportunity to be heard before the imposition of any fines. Upon finding a code violation, the code enforcement board or the special magistrate is to provide the respondent with a reasonable amount of time to correct the violation. If the violation is not corrected within a stated time period, the code enforcement board or special magistrate may enter an order of violation against the respondent and may impose daily fines of up to $500 per violation (5) until the violation is corrected. Upon the proper recording of the order of violation, these fines become a lien against the real property on which the violation occurred, as well as on any other real or personal property owned by the violator/respondent. (6)

Code enforcement fines are intended to provide local governments with leverage to ensure compliance with the applicable code of ordinances. The practical effect of the statute is to induce a property owner to maintain all real property he or she may own in compliance with the code.

Regulatory Framework of Code Enforcement Liens

The enactment of F.S. Ch. 162 responded to the need to implement an administrative enforcement proceeding allowing the imposition of administrative fines by local governments to satisfy the requirements of the Florida Constitution, which states: "No administrative agency ... shall impose a sentence of imprisonment, nor shall it impose any other penalty except as provided by law." (7) "Commissions established by law, or administrative officers or bodies may be granted quasi-judicial power in matters connected with the functions of their offices...." (8)

Clearly, the Florida Constitution prohibits local governments and administrative agencies from imposing fines or penalties except as provided by law. The creation of the code enforcement proceedings in Ch. 162 accomplishes the delegation of the legislature's power and offers local governments the option of creating or abolishing by ordinance such code enforcement boards. (9) The prescribed...

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