By Arlene C. Udick, Esq., The Villages, Florida
An unlawful detainer action involves the removal of an unwanted occupant who occupied residential property with the consent of the owner or lessee but who refuses to surrender possession of the property once the property owner or lessee revoked consent for the guest to remain on the property. The person unlawfully detaining the property is not a tenant and claims no other right or interest in the property .U nder the prior statute, if the owner or lessee prevailed in the action, the clerk of court issued a writ of possession to the Sheriff describing the premises and commanding the Sheriff to put him or her in possession of the property. In addition to the time and delay necessary to obtain and serve a writ of possession, the property owner or lessee paid a number of fees and costs, including, but not limited to filing fees, a service charge for summons, sheriff’s fee for sservice and execution of the writ of possession, attorney’s fees, etc.
The new unlawful detention by transient occupant law, Sec.82.045, F.S., provides a quicker and cheaper remedy to remove unwanted occupants from residential properties. It clarifies the law by providing: (1) a statutory definition of the term “transient occupant”; (2) the factors that establish transient occupancy; and (3) what constitutes unlawful detention, thereby rendering statutory application and enforcement clearer. The law provides the authority for law enforcement to direct the immediate removal from the property of the transient occupant upon receipt of a sworn affidavit from the owner or lessee and specifies that the person who fails to comply with the officer’s direction commits criminal trespass in a structure pursuant to §810.08, F.S. In any prosecution of a violation of Sec.810.08 F.S., whether the defendant was properly classified as a transient occupant is not an element of the offense; the state is not required to prove the defendant was in fact a transient occupant, and the defendant’s status as a permanent resident is not an affirmative defense.
The statute also affirms the existing right of the property owner or lessee to effect removal of the unwanted occupant pursuant to a civil action for unlawful detainer pursuant to Sec.82.04 F. S. If the court determines the defendant is not a transient occupant but a tenant of residential property governed by Part II of Chapter 83 F.S., the court may not dismiss the unlawful detainer action. Rather, the court must allow the plaintiff time to give the defendant the pre-eviction notices required by Chapter 83 F.S. and amend the complaint to pursue eviction.
The due process rights of all parties are respected regarding both causes of action for wrongful removal and for removal of a transient occupant pursuant to Sec.82.04, F.S. This new law is a welcome change for owners and lessees desiring to evict unwanted residential guests.
A new section within Part II, Chapter 83 Florida Statutes has created Sec.83.561 F.S. It provides that a purchaser taking title to a tenant-occupied residential property following a foreclosure sale takes title to the property subject to rights of the tenant provided in the new section.
The federal Protecting Tenants At Foreclosure (PTAF) law expired on December 31, 2014. The PTAF overlaid any state law protections for tenants, providing bona fide tenants with time after foreclosure before having to leave the foreclosed rental property. PTAF required buyers of foreclosed properties to honor the length of the tenant’s residential lease or, if there was no lease, give the tenant ninety (90) days’ notice to vacate the home.
In the new section the tenant may remain in possession of the property for 30 days following the date of the purchaser’s delivery of a written 30-day notice of termination. The act provides the form for the Notice to Tenant of Termination.
NOTICE TO TENANT OF TERMINATION
You are hereby notified that your rental agreement is terminated on the date of delivery of this notice, that your occupancy is terminated 30 days following the date of the delivery of this notice, and that I demand possession of the premises on (date). If you do not vacate the premises by that date, I will ask the court for an order allowing me to remove you and your belongings from the premises. You are obligated to pay rent during the 30-day period for any amount that might accrue during that period. Your rent must be delivered to (landlord’s name and address).
If the tenant fails to vacate the premises, the purchaser at the foreclosure sale may apply to the court for a writ of possession based upon a sworn affidavit that the 30-day notice of termination was delivered to the tenant and the tenant failed to vacate the premises at the conclusion of the 30-day period. The Writ of Possession shall be served pursuant to Sec.83.62 F.S. – which outlines the procedure for restoring possession of the premises to the landlord.
Section 85.561 F. S. does not apply: 1) if tenant is the mortgagor or the child, spouse, or parent of the mortgagor in the foreclosure; 2) the tenant’s rental agreement is not the result of an arm’s length transaction; or 3) the tenant’s rental agreement allows the tenant to pay rent that is substantially less than the fair market rent for the premises, unless the rent is reduced or subsidized due to a federal, state, or local subsidy.
The purchaser at a foreclosure sale is subject to the provision of Sec.83.67 F.S.– the Prohibited Practices section of the Florida Residential Landlord Tenant Act. The Section prohibits: (1) the termination or interruption, directly or indirectly, of any utility service furnished to the tenant, including, but not limited to, water, heat, light, electricity, gas, elevator, garbage collection, or refrigeration; (2) the landlord from changing the locks in an effort to force a resident to vacate without a writ of possession; (3) the landlord from discriminating against a service member in offering a dwelling unit for rent or in any of the terms of the rental agreement: (4) a landlord from preventing a tenant from displaying one portable, removable, cloth or plastic United States flag; (5) A landlord from removing the outside doors, locks, roof, walls, or windows of a unit except for purposes of maintenance, repair, or replacement; and (6) the landlord shall not remove the tenant’s personal property from the dwelling unit unless such action is taken after surrender, abandonment, recovery of possession of the dwelling unit due to the death of the last remaining tenant in accordance with section 83.59(3)(d), or a lawful eviction . Until the purchaser assumes an existing rental agreement with the tenant that has not ended or enters into a new rental agreement with the tenant, the purchaser does not assume the obligations of a landlord. Given the complexities of laws relating to foreclosures and landlord tenant, this new Sec.83.561, F.S. should prove beneficial to the rule of law.
The stated purpose of the legislation is: to promote the financial stability of the United States by improving accountability and transparency in the financial system; to end "too big to fail"; to protect the American taxpayer by ending bailouts; to protect consumers from abusive financial services practices; and for other purposes.
July 21, 2011 was the official date on which the function and authority was transferred from other federal regulatory agencies to the CFPB . On that same date, the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act of 1968 (TILA), among other federal laws and regulations, were transferred from the Department of Housing and Urban Development and the Federal Reserve Board respectively to be administered and enforced by the CFPB.
As of January 21, 2014, all residential mortgage transactions in the United States are now regulated by the Dodd-Frank Act and the CFPB. The scope of this article is limited to the impact of the Dodd-Frank Act on a purchase money mortgage in a residential transaction. The scope of this article only covers seller financing to an owner occupant. Exempted from CFPB oversight is the extension of credit primarily for a business, commercial or agricultural purpose or an extension of credit to someone other than a natural person. .
When is a seller financer a loan originator?
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was enacted on July 30, 2008. It mandates a nationwide licensing and registration system for residential mortgage loan originators (MLOs). The SAFE Act prohibits individuals from engaging in the business of residential mortgage loan origination without first obtaining and maintaining annually: (1) employees of a covered financial institution, registration as a mortgage loan originator and a unique identifier (federal registration); or (2) for all other individuals, a state license and registration as a mortgage loan originator, and a unique identifier.
A “loan originator” is defined to include, among other definitions, the seller financer only if the seller financer does not provide the funds for the transaction at closing out of the seller financer's own resources, including drawing on a bona fide warehouse line of credit, or out of deposits held by the seller financer.
On July 21, 2011, Title X of the Dodd-Frank Act transferred rulemaking authority for the SAFE Act to the CFPB. The CFPB recodified the SAFE Act regulation as Regulation G. Although the definition of a “loan originator” under the Dodd-Frank Act is broad in scope, the Regulation identifies two categories of seller financing excluded from the “loan originator” definition.
Seller financers could be considered creditors under Regulation Z if they extend credit secured by a dwelling (other than high-cost mortgages subject to §1026.32) six or more times in the preceding calendar year, or extend more than one high-cost mortgage in any 12-month period.
In addition, the rule contains two additional special exclusions from the compensation, steering, qualification, and identification provisions for certain seller financers. These exceptions are:
1. Seller is a natural person, estate, or trust and seller provides seller financing for only one property in any 12-month period.
2. Seller is any type of seller financing entity and seller finances the sales of three or fewer properties in any 12-month period.
The first exemption to the definition of a loan originator requires that: (1) the seller originates financing for only one property in any 12-month period; (2) the seller is a natural person, estate or trust; (3) the seller did not construct the residence on the property; (4) the financing does not result in negative amortization; and (5) the financing has a fixed rate or does not adjust for the first five years.
Requirements of the second exemption include: (1) the seller originates financing for no more than three residential properties in any 12-month period; (2) the seller is a natural person or an organization, including a partnership, corporation, proprietorship, association, cooperative, trust, estate, or government unit; (3) the seller did not construct the residence on the property; (4) the loan is fully amortizing; (5) the financing has a fixed rate or does not adjust for the first five years; and (6) The seller has determined that the borrower has the reasonable ability to repay the loan according to its terms.
Ability to Repay and Qualified Mortgage (“QM”) Standards Under the Truth in Lending Act -
Ability to Repay Rule
The Ability to Repay requirements apply to closed-end consumer credit transactions secured by a 1 to 4 unit dwelling for which an application is received on or after January 10, 2014. The Ability to Repay requirements consists of eight minimum underwriting considerations. A creditor must consider the following:
1. Current or reasonably expected income or assets;
2. Current employment status;
3. The monthly payment on the covered transaction;
4. The monthly payment on any simultaneous loan;
5. The monthly payment for mortgage-related obligations;
6. The current debt obligations;,
7. The monthly debt-to-income ratio or residual income; and
8. Credit history.
A creditor must verify the information that the creditor relies on in determining a consumer's repayment ability using reasonably reliable third-party records, except that:
1. A creditor must verify a consumer's income or assets that the creditor relies on;
2. A creditor may verify a consumer's employment status orally if the creditor prepares a record of the information obtained orally.
The Ability-to-Repay Rule also prohibits prepayment penalties on residential mortgage loans except in limited circumstances.
A qualified mortgage is a home loan that meets certain standards set forth by the federal government. Creditors that generate such loans will be presumed to have also met the Ability-to-Repay Rule mandated by the Dodd-Frank Act and receive a certain level of legal protection.
The Creditor has maximum legal protection (“Safe Harbor”) when the loan meets QM requirements , and the APR is not more than 1.5% over the average prime offer rate (APOR). If the APR is more than 1.5% over APOR , then you have less legal protection in the form of a Rebuttable Presumption that the creditor has considered the consumer’s ability to repay the loan.
The qualified mortgage rule, as defined by CFPB, is designed to create safer loans by prohibiting or limiting certain high-risk products and features.
The Dodd-Frank Act defines a “qualified mortgage’ to mean any residential mortgage loan for which:
1. The periodic payments must not result in an increased principal balance, nor allow the consumer to defer repayment;
2. The terms must not result in a balloon payment (unless allowed by federal law;
3. Income resources must be on file and verified;
4. For fixed-rate loan the payment schedule must fully amortize and include all taxes, insurance, and assessment;
5. For adjustable rate loans, the payment schedule must be based on the maximum rate permitted during the first five (5) years;
6. It must comply with the CFPB’s regulations relating to ratios of total monthly debt to monthly income;
7. Total points and fees cannot exceed 3percent of the total loan amount; and the term of the loan cannot extend beyond 30 years (except in high cost areas).
Home Ownership and Equity Protection Act (HOEPA)
The Dodd-Frank Act amends Regulation Z by expanding the types of mortgage loans, now including a purchase money mortgage, that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA), revising and expanding the test for coverage under HOEPA, including a pre-loan counseling requirement.
The requirements of HOEPA apply to a high-cost mortgage, which is any consumer credit transaction that is secured by the consumer's principal dwelling, and in which:
1. The transaction’s annual percentage rate (APR) exceeds the applicable average prime offer rate by more than 6.5 percentage points for most first-lien mortgages, or by more than 8.5 percentage points for a first mortgage if the dwelling is personal property and the transaction is for less than $50,000.00;
2. The transaction’s APR exceeds the applicable average prime offer rate by more than 8.5 percentage points for subordinate or junior mortgages;
3. The transaction’s points and fees exceed 5 percent of the total transaction amount or, for loans below $20,000.00, the lesser of 8 percent of the total transaction amount or $1,000.00 (with the dollar figures also adjusted annually for inflation); or
4. The credit transaction documents permit the creditor to charge or collect a prepayment penalty more than 36 months after the transaction closing or permit such fees or penalties to exceed, in the aggregate, more than 2 percent of the amount prepaid.
The Dodd-Frank Act implements new restrictions and requirements concerning loan terms and origination practices for mortgages that falls within HOEPA's coverage test. For example:
1. Balloon payments are generally banned, unless they are to account for the seasonal or irregular income of the borrower, they are part of a short-term bridge loan, or they are made by creditors meeting specified criteria, including operating predominantly in rural or underserved areas;
2. Creditors are prohibited from charging prepayment penalties and financing points and fees;
3. Late fees are restricted to four percent of the payment that is past due, fees for providing payoff statements are restricted, and fees for loan modification or payment deferral are banned;
4. Creditors and mortgage brokers are prohibited from recommending or encouraging a consumer to default on a loan or debt to be refinanced by a high-cost mortgage;
5. Before making a high-cost mortgage, creditors are required to obtain confirmation from a federally certified or approved homeownership counselor that the consumer has received counseling on the advisability of the mortgage.
Enforcement by the CFPB
Dodd-Frank provides litigation authority to the CFPB to enforce violations of the Federal consumer financial laws. The civil remedies are draconian and grants the court to provide any appropriate legal or equitable relief which may include, without limitation, (A) rescission or reformation of the contract; (B) refund of moneys or return of real property; (C) restitution; (D) disengorgement; (E) payment of damages and other monetary relief; (F) public notification regarding the violations, including the costs of notification; (G) limits on the activities or functions’ of the person; and (H) civil money penalties.
The civil penalties consist of the following:
• First tier-for any violation of a law, rule or final order or condition imposed in writing by the CFPB-up to $5,000 per day during which the violation or failure to pay continues.
• Second tier-for recklessly engaging in a violation of a Federal consumer financial law, up to $25,000 per day during which the violation continues.
• Third tier-for knowingly violating a Federal consumer financial law, up to $1 million per day during which the violation continues.
The CFPB, the state attorneys general, and State regulators have civil enforcement authority of violations of the Dodd-Frank Act. My reading of the statue leads me to believe that only the CFPB is entitled to collect the civil penalties provided in Section 5565.
This article is not meant to be a tutorial on Dodd-Frank and private money lending in residential situations. The purpose is to provide an overview and starting point for the lawyer who may have a client who will be financing the purchase of a buyer’s residence.
The next article in this installment will cover the transfer of authority from various governmental departments into the CFPB, and several new causes of action that have been created by that transfer.
This article addresses the Supreme Court’s response to the procedural aspects of two sections of the Act. Specifically, to implement the Act, the Court adopted Rule 1.115, and modified three existing foreclosure-related forms.
The Florida Fair Foreclosure Act created section 702.015, Florida Statutes. The Legislative intent of the new section was to expedite the foreclosure process by ensuring initial disclosure of a plaintiff’s status and the facts supporting that status, thereby ensuring the availability of documents necessary to the prosecution of the case. The new provisions, among other things, detailed the required content of a complaint seeking to foreclose on certain types of residential properties with respect to the authority of the plaintiff to foreclose on the note and the location of the note; authorized sanctions against plaintiffs who fail to comply with the complaint requirements; and provided for non-applicability to proceedings involving timeshare interests.
The Act also amended Section 702.11, F.S., the alternative foreclosure procedure. The amendments addressed adequate protection for lost, destroyed, or stolen notes in mortgage foreclosure actions and listed the acceptable reasonable means of providing adequate protection, “if so found by the court”. Section 702.11(1) provides some guidance as to what constitutes a reasonable means of providing adequate protection under sec.673.3091 , if so found by the court: (a) a written indemnification agreement by a person reasonably believed sufficiently solvent to honor such an obligation; (b) a surety bond; (c) a letter of credit issued by a financial institution; (d) a deposit of cash collateral with the clerk of the court; or (e) such other security as the court may deem appropriate under the circumstances.
The statute further states that “[a]ny security given shall be on terms and in amounts set by the court, for a time period through the running of the statute of limitations for enforcement of the underlying note, and conditioned to indemnify and hold harmless the maker of the note against any loss or damage, including principal, interest, and attorney fees and costs, that might occur by reason of a claim by another person to enforce the note.”
Finally, acknowledging the Court’s exclusive role in adopting rules of procedure for the court system, the Act requested that the Court amend the Florida Rules of Civil Procedure “to provide expedited foreclosure proceedings in conformity with the act and … develop and publish forms for use in such expedited proceedings.”
In response, the Supreme Court of Florida on January 14, 2016, issued final amendments to the Florida Rules of Civil Procedure to implement the Florida Fair Foreclosure Act. These amendments were initiated by the Civil Procedure Rules Committee, which filed a “fast-track” out of cycle report, pursuant to Florida Rule of Judicial Administration 2.140(e), proposing amendments to the Florida Rules of Civil Procedure in response to the legislative change. The Court considered the Committee’s report and proposals and on December 11, 2014, the Court issued an opinion adopting the proposals and providing a sixty day comment period. After the comment period expired, the Court adopted the new Rule 1.115 and made the following changes to the Civil Procedure forms.
NEW Rule 1.115 (Pleading Mortgage Foreclosures). New Rule 1.115 specifically governs pleading requirements in foreclosure actions. The rule incorporates the requirements of section 702.015, Florida Statutes, detailing pleading requirements where the plaintiff is the holder of the original note secured by the mortgage, where the plaintiff has been delegated authority to institute an action on behalf of another who is entitled to enforce the note, and where the plaintiff seeks to enforce a lost, destroyed, or stolen note. New Rule 1.115 closely tracks the language of the statute. The first sentence of subdivision (a) of the rule is amended to clarify that the rule is intended to govern foreclosure of a mortgage or lien that is secured by a promissory note on residential real property. Subdivision (d) of the rule is amended to add a reference to section 702.11 Florida Statutes for completeness and clarity of “the adequate protections which must be provided before entry of judgment.” Subdivision (d) of the rule address lost, destroyed, or stolen instruments. In such cases the claimant is required to provide “adequate protection” against “loss that might occur by reason of a claim by another person to enforce the instruments.” http://www.floridabar.org/TFB/TFBResources.nsf/0/10C69DF6FF15185085256B29004BF823/$FILE/Civil.pdfhttp://www.floridabar.org/TFB/TFBResources.nsf/0/10C69DF6FF15185085256B29004BF823/$FILE/Civil.pdf
Form 1.944(a) (Mortgage Foreclosure). This form is to be used only in mortgage foreclosure cases where the location of the original note is known. The form addresses the issues of delegated authority to institute a mortgage foreclosure action and certification of possession of the original note. As with new Rule 1.115, the amendments that were made to this form closely follow the requirements for pleading set forth in section 702.015 Florida Statutes (2015).
Paragraph (3) (c) has been amended and a new paragraph (3) (d) was added. The amendments provide separate choices where the delegated authority to institute the action comes from the holder of the original note and where it comes from one who is not the holder but who is otherwise entitled to enforce the note.
Form 1.944(b) (Mortgage Foreclosure). This mortgage foreclosure complaint form is for use in mortgage foreclosure cases where the location of the original note is unknown. It incorporates the pleading requirements for such cases set forth in section 702.015(5) Florida Statutes (2015). It also incorporates the requirements of section 673.3091 (Enforcement of lost, destroyed, or stolen instrument).
Form 1.944(c) (Motion for Order to Show Cause) and Form 1.944(d) (Order to Show Cause). Form 1.944(c) is a motion for an order to show cause for entry of final judgment of foreclosure. Form 1.944(d) is an order to show cause to be issued following the filing of the motion for an order to show cause. These forms are meant to be used in proceedings under section 702.10 Florida Statues (2015). Paragraph 7 of form 1.944(c) and paragraph 10 of form 1.944(d), referring to homestead status was deleted.
On January 27, 2016, Margery Golant filed a motion for rehearing of the Supreme Court’s decision approving Rule 1.115, Fla. R. Civ. Pro., and Forms 1.944(a) & (b). The petitioner expresses concern that the Forms are based on the premise that the mortgage subject to the foreclosure is securing a negotiable instrument, and that the Form complaints would be inappropriate if the mortgage does not secure a negotiable instrument.
The petitioner is technically correct. Section 702.015 refers to “promissory notes” rather than “negotiable instruments”, but then refers to Section 673.3011, F.S., which only applies to negotiable instruments. A negotiable instrument is an unconditional promise or order to pay a fixed sum which is payable to bearer or to order; is payable on demand or at a definite time; and which has no undertakings other than the payment of money (with certain exceptions). So in the narrow range of circumstances where one is dealing with a nonnegotiable promissory note, the provisions of sec. 702.015 (mirrored in Rule 1.115) are confusing and potentially problematic.
The petitioner’s concern is over the Forms, rather than the Rule. While the Forms are drafted based on a mortgage securing a negotiable promissory note, there is nothing in the Forms suggesting that this Form is appropriate in all circumstances. It is not possible to anticipate all possible circumstances. The Form works for a significant majority of foreclosure actions.
The petitioner’s request that the comments to the Form clarify that the form is only appropriate for negotiable instruments, is unobjectionable. However, the goal of having a final Rule and Form more than 2.5 years after HB 87 passed far outweighs the petitioner’s desire to clarify the scope of the Form.
In re: Final Report and Recommendations of the Foreclosure Initiative Workgroup, AOSC13-28 (Fla. 2013).
2013 Fla. Laws ch. 2013-137. In addition to the matters discussed in this Article, the Florida Fair Foreclosure Act also created §702.036 F.S.; requires a court to treat a collateral attack on a final judgment of foreclosure on a mortgage as a claim for monetary damages under certain circumstances; prohibits a court from granting certain relief affecting title to the foreclosed property; provides for construction relating to the rights of certain persons to seek specified types of relief or pursue claims against the foreclosed property under certain circumstances; amends §702.10 F.S.; revises the class of persons authorized to move for expedited foreclosure to include lienholders; defines the term “lienholder”; provides requirements and procedures with respect to an order directed to defendants to show cause why a final judgment of foreclosure should not be entered; provides that certain failures by a defendant to make certain filings or to make certain appearances may have specified legal consequences; requires the court to enter a final judgment of foreclosure and order a foreclosure sale under certain circumstances; revises a restriction on a mortgagee to request a court to order a mortgagor defendant to make payments or to vacate the premises during an action the premises during an action to foreclose on residential real estate to provide that the restriction applies to all but owner-occupied residential property; provides a presumption regarding owner-occupied residential property; The law was approved by the Governor on June 7, 2013 and filed on that same date in the Office of Secretary of State.
Id. Art. V, §2(a), Fla. Const., gives the Florida Supreme Court the exclusive authority to adopt procedural rules in all state courts.
In re Amendments to the Fla. Rules of Civ. Procedure, No. SC13-2384, 2016 Fla. LEXIS 68, at *1 (Jan. 14, 2016).
The provisions of §702.015, Fla. Stat. (2015) apply to cases filed on or after July 1, 2013. 2013 Fla. Laws ch. 2013-137 §8.
§ 702.015(3), Fla. Stat. (2015).
§ 702.11(1), Fla. Stat. (2015).
§ 673.3091(2), Fla. Stat. (2015) provides that a person seeking enforcement of an instrument not in possession of that instrument must prove the terms of the instrument and the person’s right to enforce the instrument. The Court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
§ 702.11(1), Fla. Stat. (2015).
2013 Fla. Laws ch. 2013-137 § 9.
In re Amendments to the Fla. Rules of Civ. Procedure, No. SC13-2384, 2016 Fla. LEXIS 68 (Jan. 14, 2016).
Id. at *1.
In re Amendments to the Fla. Rules of Civ. Procedure, 153 So. 3d 258, 259 (Fla. 2014).
§ 673.3091(12), Fla. Stat. (2015).