Too Late to Foreclose? re: Florida Mortgage Foreclosure Statute of Limitations
As many lenders know, Florida has a five year statute of limitations for mortgage foreclosures. This requires that a foreclosure lawsuit be filed within that amount of time following the borrower’s default. But what happens if a foreclosure is filed and then dismissed? Does the clock start again following the dismissal or does the lender still need to bring the second foreclosure suit within five years of the original default? At the moment, these appear to be open questions in Florida. Although the courts have provided some guidance, the question may not ultimately be answered until the Florida Supreme Court weighs in, which it is expected to do in 2015.
Earlier this year, the Fifth District Court of Appeal in U.S. Bank v. Bartramheld that after a foreclosure action was dismissed by the court, it could be re-filed based upon a new default that occurred after the dismissal of the suit, even if the original default which formed the basis of the first suit occurred more than five years ago. Under this “continuing default” theory, the dismissal nullified the acceleration of the loan such that payments would continue to come due each month after the dismissal and therefore the loan could be reaccelerated following a new default. Accordingly, the statute of limitations would then be five years from the new date of acceleration, allowing the lender ample time to bring a second foreclosure action.
Two months after Bartram, the Fourth District Court of Appeal in Evergrene Partners v. Citibank appeared to agree and extended the law further as it found the same result when the initial foreclosure suit was voluntarily dismissed by the lender, noting that “the claims of acceleration and subsequent acts of default have never been adjudicated on their merits” so “any acts of default still within the statute of limitations may be raised in a subsequent suit.”
Finally, and most recently, the Third District Court of Appeal joined in the discussion with its December 2014 decision in Deutsche Bank v. Beauvais, which sharply disagreed with both Bartram and Evergrene Partners. In Beauvais, like in Bartram, the first foreclosure action was dismissed by the court, however, this time the court held that the dismissal “did not by itself negate, invalidate or otherwise decelerate the lender’s acceleration of the debt in the initial action.” Since the lender took no affirmative steps to reinstate the loan following the dismissal, the second foreclosure action filed more than five years after the original default and acceleration was untimely and thus barred by the statute of limitations.
As referenced above, Bartram has been accepted for review by the Florida Supreme Court and is currently in the process of being briefed. Additionally, in its ruling in Beauvais, the court certified conflict with Evergrene Partners, likewise inviting the Florida Supreme Court to take up that case and make a final determination on the issue.
In the meantime, lenders who have dismissed a prior foreclosure action should carefully evaluate the original date of default and when the statute of limitations would run based upon that date. If a new lawsuit will not be filed within that time frame, taking affirmative steps to decelerate the loan appears to be prudent. While a mutual agreement with the borrower establishing new terms and tolling the limitations period would be ideal, even a unilateral “deceleration notice” may prove to be helpful in prosecuting a second foreclosure action.