Last Update: 08/01/16
In Florida, when the mortgage balance is more than the sales price of a home in foreclosure, there is a “deficiency” – stated another way – the deficiency is the amount due the lender when the sale proceeds in a short sale are not enough to pay the loan balance.
That “deficiency” can be the basis for further litigation by the lender against the borrower, and for many years home owners, those who were already dealing with the loss of their property to foreclosure, had to deal with the real possibility that the bank wasn’t done with him or her.
In fact, many Florida families were shocked to find that years later, after dealing with the financial crisis of foreclosure as well as the emotional burdens that foreclosure places on every family member, the story wasn’t finished. Lenders had up to FIVE years to try and get that deficiency balance — and a Florida borrower might well have years literally pass before the deficiency claim was demanded by the bank.
We’ve posted on what deficiency claims can do to Florida home owners, for further information see:
- Deficiency Judgments and Past Due Condo Association Payments
- Florida Strategic Defaults: Attitudes Are Changing and Strategic Defaults on Underwater Mortgages May be On the Rise in Florida – Why You Need a Lawyer in a Strategic Default
- Florida Deficiency Judgment Overturned by Florida Court: Bank Loses Deficiency Because it Fails to Provide Valid Evidence of Fair Market Value
Updates:
- Is a Dyck O’Neal Lawsuit Valid if it is Served After July 1, 2014?
- Did You Get A Letter From A Debt Collector For A Florida Mortgage Deficiency Related to a Foreclosure Or Short Sale?
- Can a Florida Bank File a New Foreclose Lawsuit 5 Years After Your Case Was Dismissed? When is a Florida Bank Foreclosure Lawsuit Barred by the Statute of Limitations?
- Dyck-O’Neal Increases Florida Deficiency Judgment Collection Efforts?: 19 Articles About Florida Deficiency Judgments
Florida Deficiency Statute Changed in HB 87: The Five Year Window Is Gone
When Florida Governor Rick Scott signed the Florida Foreclosure Reform bill into law, many were (and are) of the opinion that the law is unconstitutional and that the courts will find it to be in violation of state and federal constitutional protections against ex post facto (retroactive application) laws.
Today, and for the foreseeable future, however, this is a new, valid, recognized statute on the Florida books. Which means that banks must abide by it, just like home owners.
Under the new law, deficiency claims are addressed as follows:
95.11 Limitations other than for the recovery of real property.—Actions other than for recovery of real property shall be commenced as follows:
(2) WITHIN FIVE YEARS.—
(b) A legal or equitable action on a contract, obligation, or liability founded on a written instrument, except for an action to enforce a claim against a payment bond, which shall be governed by the applicable provisions of paragraph (5)(e), s. 255.05(10), s. 337.18(1), or s. 713.23(1)(e), and except for an action for a deficiency judgment governed by paragraph (5)(h).
(5) WITHIN ONE YEAR.—
(h) An action to enforce a claim of a deficiency related to a note secured by a mortgage against a residential property that is a one-family to four-familydwelling unit. The limitations period shall commence on the day after the certificate is issued by the clerk of court or the day after the mortgagee accepts a deed in lieu of foreclosure.
Section 2. The amendments made by this act to s. 95.11, Florida Statutes, apply to any action commenced on or after July 1, 2013, regardless of when the cause of action accrued. However, any action that would not have been barred under s. 95.11(2)(b), Florida Statutes 2012, before the effective date of this act must be commenced within 5 years after the action accrued or by July 1, 2014, whichever occurs first.
One Year Statute of Limitations on Deficiency Judgments in Florida
What this means is that banks and mortgage lenders in Florida now have much less time to go after borrowers for any amount left due and owing on the home loan if the sale of the foreclosure property does not cover the balance due on the home loan.
Larry Tolchinsky’s Tip:
The new Foreclosure Reform law (HB 87) changes the Florida Statutes so now the Florida statute of limitations period for a mortgage lender to enforce a deficiency judgment that the bank has obtained as part of the foreclosure lawsuit is down from 5 years to 1 year. However, this only applies to certain foreclosures:
- the limitations deadline of 12 months applies to Florida foreclosure judgments involving real estate defined as 1-family to 4-family dwelling units; and
- it only applies to any deficiency actions from July 1, 2013 forward — doesn’t matter when the foreclosure claim began.
This is good news for Florida home owners. However, even better news for a Florida home owner would be to negotiate away that deficiency with the lender, as part of a loan modification, short sale, or foreclosure defense strategy.
A good piece of advice if you are faced with a deficiency action is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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Our home was foreclosed on today, June 26, 2013. It is my husband, myself and our 3 children who live here. Would this new law apply to us? I am just sick with worry that the bank could come after us up to 5 years.
How does foreclosure work when the lender cannot produce the original loan documents work out on commercial property owned by an individual?
The language in the statute – “the day after the certificate is issued by the clerk of court ” – is that referring to the certificate that is issued as a result of the foreclosure sale?
When it says “the day after the certificate is issued by the clerk of court” they mean the Certificate of Title right??
This is issued by the clerk AFTER the foreclosure has gone to auction, correct?? I hear that it’s usually around 10 days later?
Thank you!
Hi does this law apply to deficiency’s held by a short sale approval? I have a second bank that is approving the short sale but not waiving the deficiency even though the first is. Thanks! Kate
If the bank files a deficiency judgement against two co borrowers not married or related do they file on both the entire amount of half of deficiency? If one dies and judgement is paid off does bank have to remove from remaining spouse?
My condo foreclosed on X
Foreclosure sale was on y
Deficiency lawsuit filed on 3/xx/2014
Am I not protected under the new statute of limitations?
The case is still in “pending” status. How long can it stay like that?
“… the effective date of this act must be commenced within 5 years after the action accrued or by July 1, 2014, whichever occurs first.”
Since were down to the wire now, can you be sued on July 1 or does it have to be before then? (June 30th) How do courts look at the “by” in “by July 1”? – thanks for the great blog.
shortsale 8/2011 release without prejudicie — what is the statute of limitaions?]
one family residence
…foreclosed on in Jan 2011 for an owner occupied commercial building in Vero Beach, Fl.
Thanks for your post on Florida Deficiency Foreclosure Claims. Here’s a question for your blog. Does the new law pertain to Condo Associations which foreclosed due to unpaid fees and assessments? Lots of condo owners have been foreclosed on by the COA which then takes title and rents and/or sells subject to the mortgage. How long does the COA have to pursue a deficiency judgment after it forecloses? Keep up the good work!
Does this new 1 year statute refer to both first and second mortgages from the same lender, or can we still be sued for the second loan?
foreclosure action in court is now closed. is the 1 year to file a DJ by BOA from that date or the date of the actual auction?
thanks
Does your firm negotiate settlement on deficiency judgments when the property is located in Northern Florida? Or do you only represent clients in Southern Florida?
We are interested in discussing our particular matter with your firm, but we now live in California, and the property in question is in St. Johns County.
Does this new law affect short sale deficiencies as well? It seems rather unfair that one would make every effort to short sale a property and the lenders have more time to persue than had someone foreclosed property.
Does this new law affect short sale deficiencies as well? It seems rather unfair that one would make every effort to short sale a property and the lenders have more time to persue than had someone foreclosed property.
Hello Larry,
In the case a Condominium Association has foreclosed on the property in 2012, and then, at a later date …. what happens to deficiency? Did the Statute of Limitation start at the first (Condo Assn.) foreclosure … [personal details removed for your privacy and protection]
Thanks,
Victor
I had a first and second mortgage that went delinquent almost 8 years ago. ….
Hi I underwent a foreclosure in 8/13…..
Hi, if I am reading this correctly, the new deficiency statute of limitations would NOT apply to vacant land. Is that correct?
Thanks!