Florida’s recording act, codified in Chapter 695 of the Florida Statutes, generally grants priority to an interest in real property based upon when the instrument creating that interest has been recorded. First in time is first in right. However, there is an exception to this priority scheme: when the person who records first had knowledge at the time he acquired the interest in the real property of the claim of a person who records after him, the person who records after him (assuming he did not have knowledge of the first person’s claim when he acquired his interest in the real property), has priority over the person who recorded first! Thus, Florida’s recording act is called a “race notice statute”.
Chapter 162 of the Florida Statutes allows cities to enforce their codes against their residents and the real property that they own. Code enforcement matters typically involve the enforcement of building, zoning, and fire safety codes. A lien against real property is created when the certified code enforcement order is recorded. However, many cities in Florida have enacted ordinances which grant super priority to a code enforcement lien; it is superior to all prior recorded interests in real property (with few exceptions), including prior recorded mortgages.
The cities justified the enactment of the super priority lien provision in their ordinances based on their “Home Rule Powers” (Article VIII of the Florida Constitution). Cities can enact ordinances for purposes of exercising their municipal powers, “except as otherwise provided by law.” In 2006, the Florida Supreme Court stated that a city “may legislate concurrently with the Legislature on any subject which has not been expressly preempted to the State.”
As you can imagine, lenders (and other prior recorded interest holders) were not happy with these super priority code enforcement liens. The lender would not know, whether years after the mortgage was recorded, a super priority code enforcement lien might be recorded and take a priority position over the lender against property which has limited equity. In addition, a title insurance policy contains a standard exception for governmental laws and ordinances, so the lender is not covered for this type of claim by title insurance.
Wells Fargo Bank decided to challenge the asserted super priority of a city code enforcement lien. In City of Palm Bay v. Wells Fargo Bank, N.A., 38 Fla.L.Weekly S322 (Fla. May 16, 2013), the Florida Supreme Court held that Chapter 695 of the Florida Statutes is the legislative scheme that governs recording priority, and the City’s Ordinance was inconsistent with that scheme. The Court reasoned that when a municipal ordinance is inconsistent with a Statute, then it is not concurrent, and is invalid. The Court would not allow a municipality to “destroy rights that the Legislature established by state law.” The Palm Bay Ordinance was struck down because it was “inconsistent” with State law.
The dissent argued that there is nothing in Chapter 695 or Chapter 162 which expressly preempts city code enforcement lien priority in the statutory scheme and that the legislature has enacted numerous exceptions to the “first in time first in right” recording rule, such as for special assessment liens (Chapter 170), tax deeds (Chapter 197), condominium liens (Chapter 718), and construction liens (Chapter 713).
For now, however, with respect to the priority of municipal code enforcement liens, timing is everything.