Florida Deficiency Foreclosure Claims: Banks Now Have One Year Statute of Limitations Deadline to Pursue the Deficiency

Posted By on June 18, 2013

Last Update: 08/01/16

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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:

Updates:

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.

[Read: July 2014 Deadline for Older Foreclosure Deficiency Judgments – Small South Florida Banks and Credit Unions Increasingly Aggressive on Deficiency Collection Efforts]

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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Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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Comments

35 Responses to “Florida Deficiency Foreclosure Claims: Banks Now Have One Year Statute of Limitations Deadline to Pursue the Deficiency”

  1. erika says:

    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.

  2. Larry Curvin says:

    How does foreclosure work when the lender cannot produce the original loan documents work out on commercial property owned by an individual?

  3. Hi Erika,
    I would be happy to discuss your particular situation with you if you’d like to call me, but I cannot answer specific questions in blog comments because of a concern that someone in the future might read the comments and just assume it fit their needs, too — and end up getting hurt in the process because there is a twist in their case which makes it a different situation. No cost for the call, just don’t want to discuss personal stuff in comments.
    Thanks for writing,
    Larry

  4. Hi Larry,
    Need more info to answer this — and then, it might mean that it’s not something for blog comments anyway. We cannot give out specific answers to fact patterns in blog comments out of a concern that someone in the future might try and fit that discussion to their situation, when it is not a good fit and end up hurt in the process. Why not give me a call, no charge, and talk about it?
    Regards,
    Larry

  5. Matt says:

    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?

  6. Liz says:

    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!

  7. Hi Matt and Liz,
    Regarding the certificate language, in Broward County, at the foreclosure sale/auction, the high bidder of the auction is issued a Certificate of Sale – then 10 days later – if no objections to the sale are filed – then a Certificate of Title is issued to the party who was issued the Certificate of Sale.
    Thanks for writing,
    Larry

  8. Kate says:

    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

  9. Hi Kate,
    Too detailed to write an answer here in a blog comment, but please feel free to call our office and we can chat about it (no charge).
    Thanks for writing!

  10. Nancy says:

    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?

  11. Good question, Nancy — we’ll be posting on this issue soon.
    Thanks for writing,
    Larry

  12. ty says:

    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?

  13. Hi Ty,
    For personal advice, please contact our offices to discuss your situation. We can’t give legal advice here in blog comments.
    Thanks,
    Larry

  14. RC says:

    “… 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.

  15. linda pari says:

    shortsale 8/2011 release without prejudicie — what is the statute of limitaions?]

    one family residence

  16. Hi Linda,
    Need more details. If this is a personal scenario, then please feel free to call the office to chat with me about it. We can’t go into personal stuff in general blog comments ….
    Best,
    Larry

  17. richard finamore says:

    …foreclosed on in Jan 2011 for an owner occupied commercial building in Vero Beach, Fl.

  18. Fran says:

    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!

  19. Diane says:

    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?

  20. We cannot answer personal queries in blog post comments, so we’ve edited your comment to protect your personal information and ask that you give our office a call (see the toll free number above?) for a chat.

    Thanks,
    Larry

  21. Hi Fran,
    Great question — we’ll answer in an upcoming blog post!
    Thanks,
    Larry

  22. We cannot answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.

    Thanks,
    Larry

  23. Thom Vice says:

    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

  24. Kari Stehmeyer says:

    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.

  25. Hi Kari,
    We represent clients throughout Florida but would need to know more. We cannot answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.

    Thanks,
    Larry

  26. jill says:

    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.

  27. Jill says:

    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.

  28. Victor says:

    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

  29. Hi Victor,
    Hate to be frustrating here, but we cannot answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat.

    Thanks,
    Larry

  30. Jay says:

    I had a first and second mortgage that went delinquent almost 8 years ago. ….

  31. Sheila says:

    Hi I underwent a foreclosure in 8/13…..

  32. Hi Jay,
    Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat. (We removed your personal info in the comment for your privacy and protection.)

    Thanks,
    Larry

  33. Hi Sheila,
    Sorry if this is frustrating! However, we’re not allowed to answer personal queries in blog post comments, so we ask that you give our office a call (see the toll free number above?) for a chat. (We removed your personal info in the comment for your privacy and protection.)

    Thanks,
    Larry

  34. Byron says:

    Hi, if I am reading this correctly, the new deficiency statute of limitations would NOT apply to vacant land. Is that correct?
    Thanks!

  35. Florida Foreclosure Statute | Selling Your House says:

    […] Florida Deficiency Foreclosure Claims: Banks Now Have One … – 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 … […]

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