Do Not Underestimate Your Third-Party Owner

Having practiced in a courtroom for 12 years, I sometimes catch myself thinking that I have seen it all. I have had opposing counsel write a notice of appeal of a misdemeanor conviction in pencil and on printer paper. I have even gone halfway through a highly contested trial only to find out that the court reporter was high on pills. Such situations are unexpected, but they have a unifying, underlying thread: our adversarial system is such that your opponent is supposed to push back against you. Many lawyers would be surprised to learn that the realm of Florida foreclosure defense includes situations where attorneys hold themselves out on websites and in advertisements as “consumer advocates” that protect their clients’ homes, only to have an extra money-making scheme in the backdrop of their practice. This unspoken revenue stream strains the ethics of most lawyers, but there have been, and still exist, some attorneys that continue to tap into this practice known as equity skimming.

Equity skimming occurs when a third-party buyer, typically a business entity or speculative individual, purchases a property that is in default or pending an active first mortgage foreclosure. These purchases usually take place during a subordinate lien foreclosure, such as a homeowner or condominium association lien foreclosure, or even during a bankruptcy trustee sale. Because the amounts sought by associations are often in the five figures or even lower, third-party buyers are able to spend relatively low amounts on distressed properties. Once a certificate of title is issued to the third-party buyer, the property in question is secured and likely rented out to unsuspecting tenants. The rents gleaned from the property are the fuel that drive this “engine,” and can be a powerful incentive for third parties. The contentiousness of these cases becomes exponentially greater when a “consumer advocate” foreclosure defense attorney is at the helm—frequently as a member of the third-party entity, as a corporate officer or a registered agent. While Florida law limits the types of issues that may be raised by third parties, the system provides the perfect vehicle to incentivize delay, which equates to more rents and more profits.