Cases Arising out of Florida’s Foreclosures and Down Property Market

One of the biggest economic concerns in Florida continues to be the decreased prices in the real property markets, both residential and more recently commercial.  Any time this type of financial upheaval occurs, important legal cases will result, although sometime the maxim that difficult facts can result in bad law holds true.  The classic example of this in the foreclosure context is the case that started it all, the case the gutted the impairment of contracts clause in the U.S. Constitution, Home Building & Loan Association v. Blaisdell, 290 U. S. 398 (1934).  In Blaisdell, the state, basically concerned about all the homes that would be in foreclosure, enacted a moratorium on foreclosing, if certain minimum payments were made, and so on, clearly impairing the rights of mortgage holders, and the held that  this did not violate the constitutional impairment of contracts provision.  An awful decision, since the impairment of contracts clause was explicitly added to keep states from doing debt relief in such a fashion.

Which brings us to the current day, and a case from the 3rd DCA  in which the court said it was sending a message to the trial judges and laying down a rule that granting a motion for an extension of time in a foreclosure case out of benevolence and compassion (empathy)  was an abuse of discretion.  http://www.3dca.flcourts.org/Opinions/3D09-2405.pdf  If Justice is to  be blind, this is a correct decision; rulings are to be made without respect to the parties.  Interesting as well were further comments in the Daily Business Review as to the facts of the case, and finding out that the home at issue is a multi-million dollar home, and that the defendants had already filed bankruptcy to stay the foreclosure action, which bankruptcy was dismissed with a six month bar on filing a new one, a bar which would have kept the defendant from filing a new petition before the originally scheduled sale.

The whole area of the pending foreclosure cases is a troubled one, troubling from a human perspective because these are real people involved, but perhaps even more troubling because of the derogation of  contract law in the context of foreclosures.  Is it even ethical for attorneys to attempt to delay the process of foreclosure for the sake of delaying the displacement of foreclosed families?  Should not the question be if the homeowner is in default under the terms of the mortgage, and if so, foreclosure is granted.  Attempting to have the parties work out a solution is fine if both parties agree, but forcing dispute resolution- this is definitely a beast of a different coat.  Up to two years to foreclose is a breakdown of the court system.

In this same vein, the Eleventh Circuit has just issued an opinion on whether the Interstate Land Sales Full Disclosure Act, better known as ILSA, applies to certain condo sales. 11th Circuit ISLA Decision Slight context, ILSA is not to apply if the sale is for a condo the developer has agreed to deliver within 2 years.  If ILSA applies, then it is often a basis to get out of a contract and recover a deposit. In the case at the Eleventh Circuit, the buyers had put a deposit down on a condo in 2005, probably at the peak of the market.  The condo was completed  within the 2 years, but the buyers sued for their deposit back, arguing that it was subject to ILSA, because the  Force Majeure  contract clause  meant that the claim of delivery within 2 years was illusory, even though delivery had occurred.

The court described the case as thus:

In a market-based economy the price of housing, like other goods, is subject
to swings. There was a sharp upward swing in housing prices between late 2000
and the end of 2005, and the resulting bubble was bigger in Florida than it was in
most other states. Home prices there rose eighty-two percent in absolute terms
during that short period, outstripping the fifty-one percent national increase. See
Gabriel Montes Rojas et al., The Florida Housing Boom, 3 Fla. Focus 1, 2 (2007).
All bubbles eventually burst, as this one did. The bigger the bubble, the bigger the
pop. The bigger the pop, the bigger the losses. And the bigger the losses, the more
likely litigation will ensue. Hence this case.

There may be a conflict with this decision and some Florida Supreme Court decisions, so the final chapter may not be written.

Posted on October 16th, 2009 by Woodring Law, filed under Uncategorized
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