By: Gian Ratnapala, Esq.
Associate Attorney

During 2007 to 2008 a large number of mortgage foreclosure cases were filed and dismissed throughout the State of Florida.  Recently, however, a new wave of mortgage foreclosure cases has been filed to restart the foreclosure process on these previously dismissed cases.  Whether these mortgagees are precluded from restarting a foreclosure action that was previously dismissed under the doctrine of statute of limitations remains a mystery.

Statute of Limitations

Statute of limitations is a hard and fast legal rule that prevents a party from filing a lawsuit after all elements necessary to the filing of a cause of action have occurred. [1] In a mortgage foreclosure action, the statute of limitations begins to run from the date on which the last installment under the note is due or from the date on which the note was accelerated by the mortgagee. [2] Under section 95.11(2)(c), Florida Statutes, an action to foreclose on a mortgage must be brought within five years of the date on which the last installment under the note is due or from the date on which the note was accelerated (which events start the clock on statute of limitations).  Additionally, if the last payment on the note is not yet due, acceleration is a necessary precondition to bringing a mortgage foreclosure action. [3] Therefore, a mortgage foreclosure action must be brought within 5 years of acceleration of the note by the mortgagee.

A number of mortgage foreclosure cases initiated between 2007 and 2008 were dismissed due to irregularities in pleadings, foreclosure procedure, failure to prosecute, or other technical deficiencies despite the mortgagees having already accelerated the note or alleging acceleration in their mortgage foreclosure complaints.  Many of these dismissed mortgage foreclosure cases have recently been re-filed.  However, most of these re-filed foreclosure cases may not be actionable due to the statute of limitations.  In most instances, the statute of limitations bars a mortgagee from re-filing of a mortgage foreclosure case after 5 years of the first acceleration. [4]

In some cases the running of the statute of limitations may be tolled or waived by voluntary payments or mortgage modifications [5]; however, this would occur only in a minority of cases.  In the event of a mortgage modification, evidence of the modification would be a record instrument that would be easily ascertainable from a title review, and put the world on notice of the renewed agreement between the mortgagee and the homeowners.  A voluntary payment, on the other hand, would toll or restart the statute of limitations, but would be hardly ascertainable from public information.  Consequently, in a handful of cases, the re-filing of a seemingly time barred case may be proper.

1. Kush v. Lloyd, 616 So. 2d 415, 419 (Fla. 1992) (stating “A statute of limitation runs from the date the cause of action arises; that is, the date on which the final element (ordinarily, damages, but it may also be knowledge or notice) essential to the existence of a cause of action occurs.”).

2. See, generally, Locke v. State Farm Fire & Cas. Co., 509 So. 2d 1375, 1377 (Fla. 1st DCA 1987) (stating “It has been held that the statute of limitations on a mortgage foreclosure action does not begin to run until the last payment is due unless the mortgage contains an acceleration clause.”) (citation omitted).

3. Id.

4. See Houck Corp. v. New River, Ltd, 900 So. 2d 601, 605 (Fla. 2d DCA 2005) (stating that a mortgage foreclosure action must be filed within 5 years of accrual of the cause of action).

5. § 95.051, Fla. Stat.

Advantages to a Community Association

A community association can greatly benefit from recognizing situations where the first mortgagee's dismissed foreclosure action could be used to the Association's advantage.  Only liens for ad valorem taxes and first mortgages have priority over a community association's lien for unpaid assessments. [6] As such, if the first mortgage is unenforceable due to the statute of limitations, Association virtually has the first priority lien on the subject property.

Therefore, community associations should aggressively pursue foreclosure on real property where the first mortgage may be barred by the statute of limitations.  This is because, if the community association takes title to the property at its foreclosure sale, the community association will very likely prevail against the first mortgagee in a mortgage foreclosure action filed on a later date.  Additionally, third party purchasers are more likely to purchase at a community association foreclosure sale given the lowered risk of losing their investment to a foreclosure by the first mortgagee.  As such, community association possibly would be able to recover its entire past due assessments and potentially benefit from a profitable sale which would help bridge the budget shortfalls caused by the increased number of delinquencies within the community.

6. See, e.g., Garcia v. Stewart, 906 So. 2d 1117, 1120 (Fla. 4th DCA 2005) (explaining that an association's lien for unpaid assessments is superior to the second mortgage).