Whose Lien Comes First?

Competing real estate lien priority was the issue that the Florida Fourth District Court of Appeal recently issued an opinion on in U.S. Bank National Association v. Grant. The question was whether a homeowner’s association lien for unpaid assessments has priority over the lien of the first mortgage lender in a foreclosure proceeding. The appellate court found in favor of the lender as the declaration establishing the homeowner’s association lacked specific language indicating that the HOA lien “related back” to the filing of the declaration or had priority over subsequent mortgages.

Does this holding mean that homeowner’s associations could amend their declarations and give subsequent liens for unpaid assessments priority over first mortgages recorded after the amendment? I think that is the logical reading of this opinion. Also, I believe that the same outcome could be obtained by condominium associations which want to have their liens given priority.

I think associations which want to take this step should think very carefully before amending their declarations. As these actions give unpaid assessment liens priority over a first mortgage, lenders may be unwilling to extend loans to homeowners in these developments, or charge a higher rate of interest because of the increased risk to the lender.

I would be very surprised if this case is not appealed to the Florida Supreme Court. Stay tuned for further developments.  For more information about our real estate practice area, click here and read an earlier blog post about closing costs here.