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Roadblocks in foreclosures of real estate owned by a
deceased person.
As the soft real estate market produces fewer closings and
more foreclosures, determining the proper defendants to a
foreclosure proceeding comes up more often. Generally, to be
valid, a foreclosure lawsuit must serve, either personally or
constructively, all owners of real estate. The issue is
determining who owns real estate when the record owner is dead.
The answer in part depends on whether the real property was the
homestead of the decedent. First, “the Estate” cannot own real
estate in Florida. The “Estate” is property, and cannot own real
property. Ashmead v. Wilson, 22 Fla. 255, 1886 WL 1203
(Fla.). The Personal Representative, if one is appointed, is the
person who must be served in order to sue “the estate.” Sec.
733.612 (20), F.S. However, if the property is homestead, the
heirs must be determined and served, either personally or
constructively. Thus, a foreclosure action against the personal
representative is suing the wrong person for homestead property.
For non-homestead property, when a personal representative has
been named by the court, and has not been removed or discharged,
one would think that suing the personal representative alone
would be sufficient. The logic of this argument is that since
non-homestead property can be sold without the heirs joining in
the sale, then title can be wrestled away in a foreclosure
without joining the heirs.
However, the Florida Supreme Court held in Jones v. Federal
Farm Mortgage Corporation, 132 Fla. 807, 182 So. 226 (1938),
that the heirs must be joined as defendants in a foreclosure of
non-homestead property. The Court’s reasoning was that certain
rights in the property are given to the heirs at the moment of
death, subject to being taken back by the Personal
Representative if necessary to pay the costs of administration,
claims or taxes. Sec. 732.101, F.S., codifies this, stating that
the decedent’s death vests the heirs’ right to the decedent’s
intestate property as of the moment of death, subject to being
“divested” by the personal representative if sold.
Who are the heirs? If a Will has been admitted to probate, the
heirs would be the persons to whom the real property in question
was devised (the “devisees”). If not specifically devised, the
real property is considered devised through the residuary clause
of the will (“the rest, remainder and residue”). If there is no
Will, the heirs are the intestate heirs.
A foreclosing party who knows or suspects that the record owner
is dead often petitions the court to appoint an
attorney/guardian/administrator ad litem to represent heirs who
are unknown. In practice, many ad litem attorneys take a small
flat fee, review the pleadings, attend a hearing or two, and
consider their job done. Such half-hearted efforts leave the
foreclosure judgment subject to being set aside. Batchin v.
Barnet Bank, 647 So. 2d 211 (Fla. 2d DCA 1994). In
Rodriguez v. Levin, 524 So. 2d 1107 (Fla. 3d DCA 1988), the
Court held that the attorney ad litem had a duty to diligently
search for the missing heirs, and his failure to do so resulted
in the foreclosure judgment being void.
Isn’t this a big hassle just to foreclose a mortgage? Well, yes,
it is, but failure to carefully follow the law could result in a
“do-over” of the entire foreclosure proceeding, at significant
cost to the lender or to the title insurer paying to correct the
title.
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