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Message From Stephen Verbit

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I obtained my law degree in 1987 with honors from the George Washington University in Washington, D.C. Since 1987 until the present, I have been a member of The Florida Bar and have practiced law in large, medium, and small law firms, including as a partner and managing partner, and as a sole practitioner, headquartered in the Miami-Dade, Broward, and Palm Beach County regions of Southeastern Florida.


In my thirty (30) year career as a practicing lawyer, I have represented agricultural land owners, asphalt paving companies, asset purchasers and sellers, auto dealers, banks, boat builders, real estate and business buyers and sellers, business owners, charitable organizations, check drawers and drawees, condominium associations, condominium owners, construction project owners, construction lienors, corporate executives, corporations, creditors, debtors, dentists, real estate developers, electrical contractors, employers, employees, entertainment companies, entrepreneurs, equipment rental companies, engineers, environmental consultants, exporters, farming companies, filmmakers, financial institutions, financial services companies, gas stations, general contractors, gun ranges, homeowner associations, homeowners, HVAC companies, importers, information technology companies, intellectual property owners, inventors, investors, interstate and international shipping companies, landlords, law firms and lawyers, lenders, lien holders, manufacturers, maintenance companies, marinas, medical practices, mortgagors, mortgagees, partners, partnerships, patent and trademark owners, pharmaceutical benefit managers, physicians, professional athletes, promotional companies, public adjusters, oil companies, real estate agents and brokers, rehab centers, restaurants, retailers, sellers, shareholders, subcontractors, tax preparers, tenants, title insurers, underground storage tank operators, and victims of breaches of contract, conspiracy, construction defects, conversion, deceptive or unfair debt collection, sales, or trade practices, forgery, fraud, noncompete agreements, theft, unjust enrichment, and worthless checks.


My legal practice on behalf of my clients has included transactional work, i.e., overseeing the due diligence, permitting and licensing, and preparing the legal documents necessary to accomplish and effectuate particular transactions, such as asset purchases and sales, purchases and sales of equity interests in business entities, business entity formation and resolutions, construction contracts, purchases and sales of real estate, mortgages, and security interests. My transactional practice and expertise has been and continues to be informed by my extensive and ongoing litigation experience.


My legal experience has been heavily concentrated in litigation in federal and state trial and appellate courts and in arbitrations and administrative agency proceedings on behalf of my clients in a wide range of disputes involving administrative regulation, code enforcement, contracts, construction defects and payment disputes, conversion or misappropriation of assets or funds, defalcations and embezzlement, defamation, deceptive and unfair trade practices, debt collection, intra-partnership or intra-corporate disputes, land use development and zoning issues, employment issues, environmental assessment, permitting, and remediation issues, asset recovery and mortgage foreclosures, forgery, fraud, hazardous waste disposal, indoor air quality issues, landlord/tenant issues, occupational health and safety, patent and trademark disputes, pollutant discharge and elimination, dredge-and-fill, and wetlands permitting issues, accounting, legal, and other professional negligence or malpractice, real estate and title issues, tortious interference issues, uniform commercial code issues, and wage and hour disputes.

3 Common Summary Judgment Mistakes Made By Lenders in Florida Foreclosures

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Imagine you are a defendant in a mortgage foreclosure lawsuit in Florida. You borrowed money, signed a promissory note and a mortgage, and defaulted on the loan. You have been sued by the lender (or an assignee of the lender), who is the plaintiff in the lawsuit. You have filed an answer and affirmative defenses. The plaintiff now moves for summary judgment, claiming there are no genuine issues of material fact and they are entitled to judgment, without a trial, as a matter of law. How do you respond to this?

In defending against summary judgment motions in foreclosure cases, I have seen many mistakes made by plaintiff’s counsel. This article describes the three most common mistakes I have seen. Sometimes all three mistakes are made in the same summary judgment motion, and sometimes only one of them. Any one of these mistakes can be fatal to the success of a summary judgment motion. These mistakes are especially prevalent in cases filed by foreclosure mill law firms seeking to foreclose on residential property. But I have seen the same mistakes made in commercial foreclosures where the lenders are represented by prestigious law firms.

Mistake #1: Authenticated Promissory Note Missing from Summary Judgment Evidence

In a mortgage foreclosure action, introduction into evidence of the original promissory note is central to the ability of the plaintiff to maintain the action and prove a defendant’s liability. See, e.g., State Street Bank and Trust Co. v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). To establish liability on a motion for summary judgment, the promissory note is one of the most important items of summary judgment evidence that must be served. The Florida court rules require that all summary judgment evidence on which the movant relies must be served at least 20 days before the time fixed for the hearing.

Surprising as it may seem, plaintiffs sometimes fail, in their summary judgment evidence, to include the promissory note. This failure makes the summary judgment motion dead on arrival.

Even if the plaintiff includes the promissory note in their summary judgment evidence, they sometimes fail to include evidence as to the authenticity of the promissory note. § 673.4011, Florida Statutes, provides that a person is not liable on an instrument unless the person signed the instrument. (A promissory note is a type of instrument.) In order to establish the borrower’s liability on a promissory note, the summary judgment evidence must include evidence that the borrower actually signed the note.

Unless the borrower has admitted they signed the note, this is a fact that must be proved by the lender in order to obtain a summary judgment. In many cases where the borrower has not admitted they signed the note, I have been surprised by the plaintiff’s failure to include this crucial evidence. The failure to include this evidence can destroy a summary judgment motion in a foreclosure case.

Mistake #2: Failure to Include Admissible Evidence of the Amount Owed

The plaintiff’s summary judgment evidence will usually include an affidavit from a representative of the lender in which they state the amount that is owed on the loan based on their review of the lender’s books and records. Sometimes, however, the affidavit and summary judgment evidence fail to include the documentation that was reviewed in order to determine the amount they are claiming is owed.

The problem is that, unless the documents on which the statements as to amount owed are based are also included in the affidavit or otherwise in the summary judgment evidence, the statement in the lender’s affidavit as to the amount owed violates the “best evidence rule,” and is inadmissible hearsay. The “best evidence rule” is embodied in § 90.952, Florida Statutes. When a party is trying to prove the contents of a writing, only the original or duplicate of the writing is admissible. See, e.g., Garcia v. Lopez, 483 So. 2d 470 (Fla. 3d DCA 1986).

The documents the lender’s representative reviewed may be admissible under the business records exception to the hearsay rule, but only if the plaintiff, though its affidavit, establishes the proper predicate for their admission, including their proper authentication. However, it would be the documents themselves that would be made admissible thereby, not the representative’s opinion or summary of what he or she thinks the records show.

The representative’s statements as to the amount owed, standing alone, are merely his or her opinion of what is contained in unverified out-of-court writings, and are offered for the purpose of establishing the truth of the matters asserted, making them hearsay, which is inadmissible in evidence. The documents themselves are hearsay, but could be made admissible under an exception to the hearsay rule. Without the documents being in evidence, the representative’s statements about what the documents say become hearsay about hearsay, i.e., double hearsay. I have been shocked at how many times I have seen this mistake made by plaintiffs in foreclosure lawsuits.

Mistake #3: Failure to Disprove All Affirmative Defenses

When a plaintiff moves for summary judgment, the plaintiff has the burden of disproving all of the defendant’s affirmative defenses. See Haven Fed. Sav. & Loan Ass’n v. Kirian, 579 So. 2d 730, 733 (Fla. 1991)(“A court cannot grant summary judgment where a defendant asserts legally sufficient affirmative defenses that have not been rebutted”). In other words, in order to have a chance to obtain summary judgment, the plaintiff must either present admissible evidence to disprove the defendant’s affirmative defenses, or show that the defenses are legally insufficient, meaning they are not valid defenses even if the alleged facts supporting them are proven.

Especially in residential foreclosures, the lender moving for summary judgment often completely ignores the defendant’s affirmative defenses. This omission eviscerates the lender’s ability to obtain summary judgment. Even if the lender disproves some but not all of the affirmative defenses, the summary judgment motion must be denied. All affirmative defenses must be addressed and disproved in the summary judgment motion in order for the motion to have a chance of success.

Conclusion

These mistakes are most often made in residential foreclosures. To be effective, objections must be properly and timely raised in opposition to a summary judgment motion. For borrowers who need time to work out a loan modification or short sale, competent legal representation can be a worthwhile expenditure.

© 2013 Stephen Verbit. All rights reserved.

Covenants Not to Compete in Florida Employment Contracts: An Overview

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 Employees sometimes get information about an employer’s business that would be useful to the employer’s market competitors. Such information could include trade secrets, proprietary processes, or specialized training that would be useful in a competing business. In addition, employees may learn about the employer’s present customers, future sales prospects, and business plans. In some instances, an employee could get enough knowledge to set up his or her own competing business.

In industries or trades where employers feel vulnerable to such competition, employers often seek to limit employees’ rights to work for or start a competing business within specified geographical areas for a long time after their employment ends. This is typically done through an agreement requiring employees, as a condition of their employment, to limit their post-employment activities. The employer’s intention is to prevent former employees from working in or starting a competing business for as long as possible and to keep them as far away as possible if they do. Such an agreement is known as a “covenant not to compete” or a “restrictive covenant.” The word “covenant” sounds very imposing, but it means the same thing as a promise. Nevertheless, such promises can be legally binding and have significant potential to impair former employees’ ability to work in future.

Florida law has balanced the interests of employers and employees so that covenants not to compete are legally enforceable under certain circumstances. The remainder of this article will summarize the requirements for enforcement of covenants not to compete.

First, in order to qualify for enforcement, the agreement must be in writing and signed by the employee.

Second, the agreement must be justified by one or more “legitimate business interests.” These can include, but are not limited to:

  • Trade secrets;

  • Valuable confidential business or professional information that otherwise does not qualify as trade secrets;

  • Substantial relationships with specific prospective or existing customers, patients, or clients;

  • Customer, patient, or client goodwill associated with an ongoing business or professional practice, by way of trade name, trademark, service mark, or “trade dress,” a specific geographic location; or a specific marketing or trade area; or

  • Extraordinary or specialized training.

In other words, employers must have some reasonable, competition-based justification for limiting former employees’ ability to work. Absent such justification, the agreement is unenforceable.

Third, the restriction on post-employment activity must be reasonably necessary to protect the employer’s interest. However, overreaching restrictions do not necessarily invalidate the entire agreement. If a contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect legitimate business interest or interests, courts have the power to modify the restraint and grant only the relief reasonably necessary to protect such interest or interests. In other words, if the issue goes to court, the judge can tailor the agreement to fit the circumstances.

Florida law specifies some guidelines for determining what restrictions are reasonable. If the restriction is not predicated on trade secret protection, which is most cases, a restriction that lasts six months or less is presumed reasonable. A restriction that lasts more than two years is presumed to be unreasonable. A restriction predicated on trade secret protection that lasts five years or less is presumed reasonable and more than ten years is presumed unreasonable. All these presumptions are rebuttable. For example, a former employee could try to prove that a six month restriction is unreasonable, or an employer could try to prove why more than a two year restriction is reasonable.

Assuming the employer can establish an otherwise enforceable restrictive covenant, there are some defenses available to the former employee. Unfortunately, the individualized economic or other hardship that might be caused to the former employee from enforcement of the restrictive covenant is not among the available defenses. A defense that is available to the former employee is that the employer no longer continues in business in the area or line of business that the restrictive covenant was intended to protect. However, this defense is not available if the former employee’s violation of the restrictive covenant is the reason for the employer’s discontinuance of the business. Another defense for the former employee  is that the employer violated the employment agreement before the former employee did. This defense is known as “prior breach” but detailed discussion of that defense is beyond the scope of this article.

Market competition at all levels of the economy is fierce. Business owners arguably have a legitimate interest in protecting their business from competition from employees in whom trust has been placed, with whom valuable knowledge has been shared. and to whom training has been given. However, the law does not provide such protection forever. Restrictive covenants must be drafted with care to ensure they are enforceable. People need jobs and often need little coercion to sign any agreement requested by their employer that they believe will secure their employment. Employees should ensure they are not signing away their ability to earn a living at the hands of an overreaching employer. Although Florida law in this area is arguably stacked against the employee, there are limits to the employer’s power. In the case of an employer seeking to enforce a restrictive covenant, the employer does not automatically win and most judges will attempt to strike a reasonable balance between the competing interests.

 

Source: Section 542.335, Florida Statutes (2013).

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Facts About Food Waste From the UN

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The impact of food waste is not just financial. Environmentally, food waste leads to wasteful use of chemicals such as fertilizers and pesticides; more fuel used for transportation; and more rotting food, creating more methane – one of the most harmful greenhouse gases that contributes to climate change. Methane is 23 times more potent than CO2 as a greenhouse gas. The vast amount of food going to landfills makes a significant contribution to global warming.

  • Roughly one third of the food produced in the world for human consumption every year — approximately 1.3 billion tonnes — gets lost or wasted.
  • Every year, consumers in rich countries waste almost as much food (222 million tonnes) as the entire net food production of sub-Saharan Africa (230 million tonnes).
  • The amount of food lost or wasted every year is equivalent to more than half of the world’s annual cereals crop (2.3 billion tonnes in 2009/2010).
  • Food loss and waste also amount to a major squandering of resources, including water, land, energy, labour and capital and needlessly produce greenhouse gas emissions, contributing to global warming and climate change.
  • In developing countries food waste and losses occur mainly at early stages of the food value chain and can be traced back to financial, managerial and technical constraints in harvesting techniques as well as storage –and cooling facilities. Thus, a strengthening of the supply chain through the support farmers and investments in infrastructure, transportation, as well as in an expansion of the food –and packaging industry could help to reduce the amount of food loss and waste.
  • In medium- and high-income countries food is wasted and lost mainly at later stages in the supply chain. Differing from the situation in developing countries, the behavior of consumers plays a huge part in industrialized countries. Moreover, the study identified a lacking coordination between actors in the supply chain as a contributing factor. Farmer-buyer agreements can be helpful to increase the level of coordination. Additionally, raising awareness among industries, retailers and consumers as well as finding beneficial use for save food that is presently thrown away are useful measures to decrease the amount of losses and waste.
  • In the United States 30% of all food, worth US$48.3 billion (€32.5 billion), is thrown away each year. It is estimated that about half of the water used to produce this food also goes to waste, since agriculture is the largest human use of water. (Jones, 2004 cited in Lundqvist et al., 2008)
  • United Kingdom households waste an estimated 6.7 million tonnes of food every year, around one third of the 21.7 million tonnes purchased. This means that approximately 32% of all food purchased per year is not eaten. Most of this (5.9 million tonnes or 88%) is currently collected by local authorities. Most of the food waste (4.1 million tonnes or 61%) is avoidable and could have been eaten had it been better managed (WRAP, 2008; Knight and Davis, 2007).
  • In the USA, organic waste is the second highest component of landfills, which are the largest source of methane emissions.

Sources: 
Global Food Losses and Food Waste – FAO, 2011
The environmental crisis: The environment’s role in averting future food crisis  – UNEP, 2009

Who Does Your Florida Real Estate Broker Represent?

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When hiring a real estate broker to assist them in buying or selling a house, many people naturally and unsuspectingly assume they will have the broker’s undivided loyalty, that the broker will follow their instructions, that the broker will keep their information confidential, and that the broker will disclose to them everything they know about the property, the other party to the transaction, and any other relevant information.

A little-publicized 2003 change in Florida law turned these assumptions on their head. In effect, real estate brokers became legally authorized to make sure they receive their commission, even if it means being disloyal and disobedient to the person who hired them.

Since 2003, the presumption under Florida law is that all real estate brokers and salespeople are operating as “transaction brokers.” Therefore, if you hire a Florida-licensed real estate broker or salesperson, and if the listing agreement does not specify you are engaging them as a “single agent,” then you have hired a “transaction broker.”

What is a “transaction broker?”  If you ask a real estate broker or salesperson, you will be told it means they represent “the transaction” and that their job is to “facilitate” the transaction by assisting both the buyer and the seller. In reality, a transaction broker’s loyalty is neither to the buyer nor the seller. A transaction broker’s only mission is to make sure the transaction is completed (and to get the commission), even if it means acting contrary to the instructions or the best interests of his or her customer.

In order to fully understand the nature of a transaction broker, it is instructive to examine the duties a transaction broker does not owe to his or her customer. Unlike a single agent, a transaction broker does not owe the customer a duty of loyalty. If you engage a transaction broker, you give up your right to his or her undivided loyalty.

Unlike a single agent, a transaction broker does not owe the customer a duty of confidentiality.  Unlike a single agent, a transaction broker’s duty of confidentiality is “limited,” and even that limited confidentiality can be waived by the customer.

Unlike a single agent, a transaction broker does not owe the customer a duty of obedience. Thus, a transaction broker is free to act in direct violation of instructions given by his or her customer, as long as doing so can be justified by the best interests of “the transaction.” When their commission is at stake, the ability of real estate brokers to self-justify is unparalleled.

Unlike a single agent, a transaction broker does not owe the customer a duty of full disclosure. A transaction broker is required to disclose known facts only if they materially affect the value of the property and only if they are not readily observable to the buyer. A transaction broker can withhold all other information from the customer, no matter how potentially useful or material it might be to the customer.

Does it make a difference? In a transaction with reasonable and financially-solid parties on both sides, and the competent involvement of ethical real estate, legal, lending, and title professionals, a transaction broker may be adequate. However, when problems arise in a transaction, the person who hired the broker may feel tremendously let down when he or she realizes the broker only represents “the transaction” and the broker, because all he or she cares about (and is legally required to care about) is the commission, pressures the customer to accede to unreasonable demands made by the other party, or demands that the customer agree to bear additional closing expenses, or chooses sides against the customer in favor of the other party to the transaction.

If you want the real estate broker you hire, and to whom you may be paying thousands of dollars in commission, to be obligated to be loyal only to you and to follow your instructions, and not to disclose your confidential information, make sure the listing agreement you sign contains a provision specifying you are engaging the broker as a “single agent” and not a “transaction broker.”

 

Unethical Home Alarm Company – Security Networks, LLC Based in West Palm Beach, Florida

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Before you consider doing business with this company, you should be aware of the large number of complaints that have been made by their customers concerning fraudulent and deceptive sales and business practices, as shown at the following link:

http://www.bbb.org/south-east-florida/business-reviews/security-systems-consultants/security-networks-in-west-palm-beach-fl-34001029

 

BigLaw Sees South Florida Real Estate Market Returning to “Normal”

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According to an article published in the Midyear 2013 South Florida Legal Guide, large law firms are reporting an increase in transactional legal work, particularly in real estate and construction.

The article cites some trends that are reportedly contributing to this increase in transactions:

  • A growing number of foreign contractors are entering the U.S. market by acquiring domestic companies or partnering with them – globalization of the construction industry;
  • The push toward using public-private partnerships (“P3”) to design, develop, build, operate, maintain, and finance county and municipal infrastructure projects; and,
  • South Florida is attracting substantial investors on a global scale.

Some limiting factors on this trend were also mentioned:

  • Difficulty in obtaining real estate financing and construction loans, especially for condominium projects; and,
  • Lack of suitable land for new development, especially for smaller homebuilders and developers.

Is It Legal to Photograph or Record Police Officers In Action?

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Recording governmental officers engaged in public duties is a form of speech through which private individuals may gather and disseminate information of public concern, including the conduct of law enforcement officers. See, e.g., Glik v. Cunnife, 655 F. 3d 78, 82 (1st Cir. 2011)(“[b]asic First Amendment principles” and federal case law “unambiguously” establish that private individuals possess “a constitutionally protected right to videotape police carrying out their duties.”). The application of this right to the conduct of law enforcement officers is critically important because officers are granted substantial discretion that may be used to deprive individuals of their liberties.

Individuals have a First Amendment right to record and photograph police officers, as long as they do not engage in other conduct that delays or obstructs officers in the performance of their official duties. Individuals have a right to record in all traditionally public spaces, including sidewalks, streets, and locations of public protests, and in any other area where individuals have a legal right to be present, including an individual’s home or business, and common areas of public and private facilities and buildings.

Officers should be prohibited from interfering with recording of police activities except in narrowly circumscribed situations. Officers should be advised not to threaten, intimidate, or otherwise discourage an individual from recording police officer enforcement activities or intentionally block or obstruct cameras or recording devices. A person should be permitted to record public police activity unless the person engages in actions that jeopardize the safety of the officer, the suspect, or others in the vicinity, violate the law, or incite others to violate the law. However, an individual’s recording of police activity from a safe distance without any attendant action intended to obstruct the activity or threaten the safety of others does not amount to interference.  Nor does an individual’s conduct amount to interference if he or she expresses criticism of the police or the police activity being observed.

See letter from the U.S. Department of Justice Civil Rights Division, which is available at: http://www.justice.gov/crt/about/spl/documents/Sharp_ltr_5-14-12.pdf.

 

Effect of Failure of Spouse to Join in Mortgage of Homestead Property in Florida

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Can a bank foreclose a mortgage against Florida homestead property owned by a married person when his or her spouse did not join in the mortgage?

Florida Constitution, Article X, Section 4(c) provides in pertinent part: “The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale, or gift….”  Thus, the Constitution requires the owner’s spouse to join in any alienation of the homestead property.

In the case of Pitts v. Pastore, 561 So. 2d 297 (2d DCA 1990), the Court applied this constitutional provision to a mortgage of homestead property that was executed by a man who was the sole owner of the property, but was also married at the time, and the wife did not sign or otherwise join in the mortgage. The Court held that such a mortgage is not void ab initio but is ineffectual as a lien until such time as either the spouse joins in the mortgage or the property loses its homestead status (which it did in that case when the man and woman divorced).

Assuming the borrower/mortgagor was married at the time he or she executed the mortgage and the property was and still qualifies as homestead, then the lien of the mortgage never attached to the property and, as a result, the bank cannot enforce its mortgage against the property and cannot foreclose. Of course, the borrower may still be liable on the note, and may be subject to claims of mortgage fraud if he or she represented to the lender he was not married.

However, there is a Florida Supreme Court case from 1940 called Bigelow v. Dunphe, 197 So. 328 (Fla. 1940) in which the Court held that it is the lender’s burden to determine whether property on which it is taking a mortgage is homestead or not and that the lender may not rely solely on the public records or statements of the borrower. The Court stated: “The fact of actual possession and use as the home of the family was one against which the lender could not shut his eyes. Every person dealing with land must take notice of an actual, open, and exclusive possession; and where this, concurring with interest in the possessor, makes it a homestead, the lender stands charged with notice of that fact, it matters not what declarations to the contrary the borrower may make.'”

In a hypothetical case, the public records may have shown the borrower was married at the time he or she executed the mortgage, which would further weaken the bank’s case, which is already weak if the borrower told bank representatives, before execution of the mortgage, that he or she is in fact married. The lender cannot rightfully say it was the borrower’s duty to disclose his or her marital status or the homestead status of the property. If the borrower made any affirmative misrepresentations, then the bank may have a claim against the borrower for fraud, but the lien of the mortgage would still not attach.

There is a caveat to all this. In Palm Beach Savings & Loan Ass’n v. Fishbein, 619 So. 2d 267 (Fla. 1993), the Florida Supreme Court ruled that a bank that took a mortgage on a marital residence, after the husband forged the wife’s name on the loan documents, was entitled to an equitable lien against the residence, even though it was homestead, to the extent that the bank’s funds were used to satisfy preexisting mortgages and taxes on the property, even though the wife had not been a party to the fraud. The Court’s rationale was basically that the wife had benefited from the prior liens being paid off and she would be unjustly enriched if she could keep the property free and clear of all liens.

Therefore, even though homestead would prevent the lien of the mortgage from taking effect, the bank might be entitled to an equitable lien to the extent the mortgage proceeds were used to pay off prior mortgages, taxes, or other liens.

Florida’s 2013 New Foreclosure Law

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Foreclosure bill becomes law

By Gary Blankenship
Senior Editor – Florida Bar News

A bill to speed up the handling of foreclosure cases in Florida courts has been signed by Gov. Rick Scott.

Scott signed HB 87 on June 7 and it became effective with his signature.

He was heavily lobbied on the measure. 

Critics contended it didn’t provide enough time for defendants with legitimate claims to find lawyers and raise those claims, and in some cases the law would prevent those who are fraudulently foreclosed from getting their homes back. 

Supporters said the legislation was needed for courts to attack more than 350,000 foreclosure cases backlogged in the state courts and also give a way for homeowners’ and condominium associations to force the completion of foreclosures when they are owed unpaid fees and assessments.

The bill:

* Cuts the statute of limitations for banks to seek a deficiency judgment against a foreclosed homeowner from five years to one year. The amount of the deficiency would be limited to the difference between the amount received in the foreclosure sale and the fair market value of the house at the time of the sale, not the amount of the original mortgage.

* Requires higher paperwork standards for lenders filing foreclosures, to include showing that the plaintiff has the right to foreclose.

* Allows show cause hearings in foreclosure cases using the summary judgment standards to speed the resolution of foreclosure cases, and at those hearings defendants will have to claim a specific, allowable defense to forestall the foreclosure.

* Allows homeowners’ and condominium associations with liens on unpaid property assessments to file for a show cause hearing if the lender does not.

* Mandates that “innocent” third parties who buy foreclosed homes cannot be divested of those homes if that foreclosure was later found to be fraudulent. Instead, the original owner will be limited to collecting monetary damages from the lender or party responsible for the fraud.

“It will accomplish its purposes with undefended cases and to the extent the court needed any help to get rid of those — and I’m not sure they did — it should help get those on to judgment as quickly as possible,” said Royal Palm Beach attorney Tom Ice, who defends foreclosures and who lobbied against the bill. “The ones I am concerned about are the ones who have hired counsel and defend [the foreclosure] and expect due process. . . . It means we attorneys defending homeowners are going to have to be quick on our feet and not miss any deadlines.”

He questioned whether lenders will partake of the faster foreclosure procedure, noting that the prior procedures were rarely used. To apply the new law in existing cases, lenders may have to refile much of the paperwork to comply with the tougher standards in the new law. 

Ice also said homeowners’ and condominium associations might have difficulty intervening in cases to speed foreclosures. The law, he noted, requires an accurate statement of the mortgage amounts owed by the borrower for the show cause hearing and he’s not sure how the associations will be able to acquire that information from banks.

Ice predicted legal challenges to the law. One constitutional challenge may be that the law infringes on the Supreme Court procedural rulemaking authority because it spells out how foreclosures will be handled. A second, more serious, challenge, he said, is likely over the provision that limits a homeowner who was wrongly foreclosed to monetary damages instead of reclaiming the home if it was purchased by an innocent third party. 

That provision, Ice said, “is taking away the court’s power to correct itself” when error or fraud is involved in the foreclosure.

“It’s like the bank can turn around and say, ‘Ha, tricked you!’” he said. “Never before in the United States has a law been passed to allow that. It’s like a statute of repose on robbing a bank. If they can last 30 days without anyone discovering it, then ‘we get to keep the money, now.’”

William F. “Fletch” Belcher, chair of the Real Property, Probate and Trust Law Section, said the section strongly supported the bill and had a hand in writing it with House Sponsor Rep. Kathleen Passidomo, R-Naples. Passidomo wrote an article on the impact of the bill for an upcoming issue of the section’s newsletter, Action Line.

Belcher said the bill will address multiple problems: blighted neighborhoods from empty properties locked in foreclosure litigation, cases becoming logjammed in the courts, and the difficulty of junior lien holders, such as homeowners’ and condominium associations, to enforce their liens.

“This bill is truly a mixed bag,” Belcher said. “There are things in there for and against every interest group.”

The most controversial parts, he said, are the sped-up show cause hearing and the protection for innocent third-party buyers of foreclosed properties. But those sections have protections, including that paperwork and service requirements must be scrupulously followed. 

“If the complaint states what it’s supposed to state and it’s properly served, then the court enters the show cause order, which basically gives the owner a short period of time to show that he or she has a defense to the foreclosure,” Belcher said. “It makes the owner make some sort of effort to show there is a defense, that there is an issue to be tried, and there is a defense to the foreclosure. If the defendant can’t do that, then the court is required to go ahead and enter a foreclosure order.”

As for the irrevocability of the final sale, he said, that only comes after there is valid service, a valid foreclosure order, and all appeals have run.

“If the final judgment gets reversed on appeal, then the safe title provision doesn’t kick in,” Belcher said.

While the new law can’t necessarily force banks to file foreclosures on their own to speed pending cases, he said it gives judges more tools. And foreclosures are different from normal civil cases where judges usually let the parties determine the pace of litigation. Because of the volume, Belcher said, judges “are driving the trains. They are setting the hearings and setting the trials, and not the lenders.”

Providing the homeowners’ and condominium associations with liens for unpaid assessments the ability to seek a show cause hearing also will speed the process, he said.

Asked about his reasons for signing the bill, Scott’s office sent a video clip of the governor answering that question to reporters. In the clip, Scott said: “It’s going to help make sure we have a timely foreclosure process so our families can make sure that they can keep their homes and make sure we get back to work. Home prices are up; new home construction is up, just like jobs are back.”