A ruling from Florida's Third District Court of Appeal could blindside real estate lenders, who might find their interests taking second place to retroactive tax liens that come years after their own loans.

Florida has long had a “first in time, first in right” policy that prioritizes liens based on filing order, so that debts recorded earlier are superior to those that follow, when courts consider the order for repaying creditors or lenders.

One of the only exceptions has been tax liens, which are superior under Florida law. Lenders know all other claims come second and are able to make strategic business decisions going forward if they're aware of existing county or other tax liens. But here's the rub: The new ruling allows tax liens to stretch backward, allowing them to apply up to 10 years retroactively. For lenders, this means a new and unforeseeable risk that could add unexpected debt to a mortgaged property. It's especially troublesome for those lending to buyers from other states, who might raise red flags among property appraisers for improperly seeking homestead tax exemptions in Florida.

“Going backwards is the problem,” said McGlinchey Stafford member Manuel Farach, who sits on the Florida Bar's executive council for the Real Property and Business Law Sections. “One of the things that always scares anybody lending money is that there can be some lien that springs up from nowhere and takes priority.”

That's what happened to lender Lansdowne Mortgage LLC, which came out on the losing side of an appellate case against Miami-Dade County.

“Even though Lansdowne was first in time, it's now second in right,” said Farach, who was not involved in the litigation. “It's a practical problem because there's nothing a lender can do to protect itself.”

The dispute arose as the parties jousted after the county imposed a tax lien on a property that allegedly improperly received homestead tax exemptions. The county moved to recoup the lost tax revenue with a lien imposed in 2014, nearly seven years after Lansdowne issued its mortgage.

Lansdowne filed a foreclosure suit against Miami-Dade and other defendants, arguing its mortgage held priority over the tax lien. Court records show the lender and county both felt the law sided with them on the issue of priority, and they filed cross motions for summary judgment.

At trial, Miami-Dade Circuit Judge Samantha Ruiz-Cohen sided with the lender, finding its mortgage superior to the county's lien under Florida's recording statute. Miami-Dade appealed, arguing the trial court improperly prioritized the debts.

On appeal, the judicial panel sided with the government.

“We find that the trial court erred by denying the county's motion for summary judgment and granting Lansdowne's motion for summary judgment on the issue of priority,” Third DCA Chief Judge Leslie B. Rothenberg wrote in the ruling issued Oct. 18, with Judges Richard J. Suarez and Vance E. Salter concurring.

Miami-Dade County Attorney Abigail Price-Williams and Assistant County Attorneys Michael J.
Mastrucci and Jorge Martinez-Esteve represented Miami-Dade.

Vivian Jaime of Ritter Zaretsky Lieber & Jaime in Miami represented Lansdowne.

A ruling from Florida's Third District Court of Appeal could blindside real estate lenders, who might find their interests taking second place to retroactive tax liens that come years after their own loans.

Florida has long had a “first in time, first in right” policy that prioritizes liens based on filing order, so that debts recorded earlier are superior to those that follow, when courts consider the order for repaying creditors or lenders.

One of the only exceptions has been tax liens, which are superior under Florida law. Lenders know all other claims come second and are able to make strategic business decisions going forward if they're aware of existing county or other tax liens. But here's the rub: The new ruling allows tax liens to stretch backward, allowing them to apply up to 10 years retroactively. For lenders, this means a new and unforeseeable risk that could add unexpected debt to a mortgaged property. It's especially troublesome for those lending to buyers from other states, who might raise red flags among property appraisers for improperly seeking homestead tax exemptions in Florida.

“Going backwards is the problem,” said McGlinchey Stafford member Manuel Farach, who sits on the Florida Bar's executive council for the Real Property and Business Law Sections. “One of the things that always scares anybody lending money is that there can be some lien that springs up from nowhere and takes priority.”

That's what happened to lender Lansdowne Mortgage LLC, which came out on the losing side of an appellate case against Miami-Dade County.

“Even though Lansdowne was first in time, it's now second in right,” said Farach, who was not involved in the litigation. “It's a practical problem because there's nothing a lender can do to protect itself.”

The dispute arose as the parties jousted after the county imposed a tax lien on a property that allegedly improperly received homestead tax exemptions. The county moved to recoup the lost tax revenue with a lien imposed in 2014, nearly seven years after Lansdowne issued its mortgage.

Lansdowne filed a foreclosure suit against Miami-Dade and other defendants, arguing its mortgage held priority over the tax lien. Court records show the lender and county both felt the law sided with them on the issue of priority, and they filed cross motions for summary judgment.

At trial, Miami-Dade Circuit Judge Samantha Ruiz-Cohen sided with the lender, finding its mortgage superior to the county's lien under Florida's recording statute. Miami-Dade appealed, arguing the trial court improperly prioritized the debts.

On appeal, the judicial panel sided with the government.

“We find that the trial court erred by denying the county's motion for summary judgment and granting Lansdowne's motion for summary judgment on the issue of priority,” Third DCA Chief Judge Leslie B. Rothenberg wrote in the ruling issued Oct. 18, with Judges Richard J. Suarez and Vance E. Salter concurring.

Miami-Dade County Attorney Abigail Price-Williams and Assistant County Attorneys Michael J.
Mastrucci and Jorge Martinez-Esteve represented Miami-Dade.

Vivian Jaime of Ritter Zaretsky Lieber & Jaime in Miami represented Lansdowne.