Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY

One of the prominent questions regarding mortgage deficiencies and the new law on Florida's statute of limitations for enforcement of a mortgage deficiency is whether it applies to a Florida short sale.

There has been uncertainty as to its application to short sales because the new law, which went into effect July 1, 2013, does not specifically mention "short sales" as one of the types of "deficiencies" subject to the one-year statute of limitations.

UPDATE!!!! - In an appellate court decision in mid August 2017 an appellate court in Florida reversed a trial court judge that had agreed with the findings in this article.  This is as far as we know, the first decision that deals with the legislative intent of these new laws. So for now - the only appellate court decision on this subject shows the analysis in this article no longer applies!!  Here is a link to the decision

On the other hand, another part of the same legislative bill HB 87 (2013) deals with the foreclosure statute. In that statute it talks about how a deficiency is measured and includes in the bill that a deficiency includes the shortage after a short sale. I addressed this issue originally in my article DEFICIENCY JUDGMENT BARRED AFTER 1 YEAR - CAN IT APPLY TO SHORT SALES? 

So the outstanding question has been, why didn't the legislature include the short sale transaction term when it limited the enforcement of a deficiency?  Why didn't they make it clear?  Thus, does a short sale deficiency have the same one-year limitations for enforcement as a foreclosure deficiency?

I am going to step out on a ledge and say - YES, the one year statute of limitations does apply to a short sale deficiency.  Here is why.

The new Florida Statute 702.06 says:

702.06 Deficiency decree; common-law suit to recover deficiency.—In all suits for the foreclosure of mortgages heretofore or hereafter executed the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound discretion of the court; however, in the case of an owner-occupied residential property, the amount of the deficiency may not exceed the difference between the judgment amount, or in the case of a short sale, the outstanding debt, and the fair market value of the property on the date of sale. For purposes of this section, there is a rebuttable presumption that a residential property for which a homestead exemption for taxation was granted according to the certified rolls of the latest assessment by the county property appraiser, before the filing of the foreclosure action, is an owner-occupied residential property. The complainant shall also have the right to sue at common law to recover such deficiency, unless the court in the foreclosure action has granted or denied a claim for a deficiency judgment.

So here we have the term "deficiency decree" defined, and we know that a deficiency decree can include the shortage not paid to the bank in a short sale. [Note that we are only speaking about instances where the bank agrees to the short sale but does NOT agree to the forgiveness of the unpaid portion of the remaining monies due to the bank.]

Next we have the other portion of the bill, which is Florida Statute 95.11, which states,

95.11 Limitations other than for the recovery of real property.—Actions other than for recovery of real property shall be commenced as follows:

(5) WITHIN ONE YEAR.—(h) An action to enforce a claim of a deficiency related to a note secured by a mortgage against a residential property that is a one-family to four-family dwelling unit. The limitations period shall commence on the day after the certificate is issued by the clerk of court or the day after the mortgagee accepts a deed in lieu of foreclosure.

Here we have two parts to examine. First we are looking at a "note secured by a mortgage".  This part of the language works fine for a short sale as it is a short payment of a note secured by a mortgage.  The next part we look at is the word “deficiency”, which in this statute is not defined – but it is in Florida Statute 702.06 and in that statue it says a deficiency includes the amounts unpaid resulting from a short sale.

So now the two statutes can be reconciled.  A deficiency can include a short sale shortage or a mortgage foreclosure shortage.  The one year limitation law applies to enforcement of a deficiency.

So that leaves only one part that gives us a problem.  The limitations statute says the clock starts to run when the “certificate” is issued by the clerk of court or the time the lender accepts a deed in lieu of foreclosure. [Another discussion is whether this means “Certificate of Sale” or “Certificate of Title” or “Certificate of Disbursements”.]  It does not mention the day the lender accepts the short sale funds.  So should a short sale be included?

My answer is Yes, it should. I say this because excluding its use would leave no time start for a short sale deficiency.  Since short sales were included in the term “deficiency”, a common meaning and application must be made.  The courts are not to write legislation, but were the clear intention is that all roads lead to the same conclusion, that common conclusion should be applied.  Here that common conclusion is that a short sale deficiency matures upon the lender receiving its shorted funds, much like the lender getting the deed in lieu of foreclosure or the Certificate being issued – in each case being the same event of the lender receiving the consideration (money or title to the property) from the “event”.

I am sure others may disagree.  But to disagree is to warp the common meaning of words and express mechanics of the foreclosure process or short sale agreement.  Bending common application of words is not how laws should be interpreted.

© 2015 Richard P Zaretsky, Esq.

 Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., ZARETSKY LAW GROUP, 1615 FORUM PLACE, SUITE 3A, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! New Website






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Donald Urschalitz
One World Realty Inc. - Jupiter, FL
P.A. Realtor ABR RSPS North Palm Beach County

Great information thank you for sharing.

Dec 04, 2015 11:44 PM #1
Bruce Walter
Keller Williams Realty Lafayette/West Lafayette, Indiana - West Lafayette, IN

Richard, your Florida real estate professionals have to love you for writing such clear,  concise, and understandable opinions of Florida real estate law here on Active Rain!!!  

I just wish we had a real estate attorney from Indiana who would blog here about applications of Indiana real estate law. 

Dec 04, 2015 11:53 PM #2
Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert

Nothing like making short sales more difficult to complete 

Dec 05, 2015 01:04 AM #3
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney


I don't see this as having anything to do about completing a short sale.  This is all about collecting the deficiency and just putting a time line on the lender to do so (where there is no forgiveness of deficiency).

Dec 05, 2015 01:12 AM #4
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Richard-your posts are written so that those of us who are not legal professionals can understand them. Thank you!!!

Dec 05, 2015 02:35 AM #5
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

Thank you soo very much Kathy!

Dec 05, 2015 03:12 AM #6
julie rice

I am in a lawsuit brought by law firm/debt collector supposedly representing B of A. I submitted motion to dismiss citing 95.11 5h and 702.06. This is from heloc (2nd lien) balance from short sale 11/2010. Motion denied, plaintiff said not a deficiency it is accelerated installment loan. I never heard from boa after sale only 5 different debt collectors since 2011. One already sued me and dismissed case. Now I don't know what to do. They are also suing for more than amount borrowed and I paid it for three years. Any advice?

Mar 16, 2017 03:50 PM #7
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

While we are on this topic - Is the Mortgage Forgiveness Act dead ???

Aug 15, 2017 10:38 AM #8
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