Super-Priority of Municipal Code Liens
A Florida city ordinance gave super-priority to liens imposed for municipal code violations. Wells Fargo Bank held a mortgage that was recorded before the code violation lien. The Bank sued to have the ordinance declared invalid. In a split decision, the Supreme Court of Florida decided that the City ordinance was outside the home-rule powers permitted by the state Constitution and implementing statutes. City of Palm Bay v. Wells Fargo Bank, N.A., No. SC11-830 (May 16, 2013).
The City has explicit statutory authority to impose fines and record the enforcement orders in the public land records, creating enforceable liens. Florida’s home-rule statute gives municipalities “the power to enact legislation concerning any subject matter upon which the state Legislature may act, except ... [a]ny subject expressly preempted to state or county government by the constitution or by general law....” Palm Bay contended that because the state Legislature has given tax liens and special assessments super-priority over earlier-recorded mortgages, municipalities have similar power to grant super-priority status to code violations liens.
The majority held that the Florida Legislature “created a general scheme for priority of rights with respect to interest [sic] in real property” when it enacted the recording statute for conveyances. As such, upholding the super-priority provision “would allow the municipality to destroy rights that the Legislature established by state law.” The dissenting justices focused on the preemption requirement of the home-rule statute. Finding that “the mechanical recording statute does not provide an all-encompassing lien priority scheme,” while pointing to several statutory provisions that alter lien priorities, the dissenters would hold that there is not even an implied, let alone an “express” preemption of legislative authority.
It seems like the Court went further than it had to in order to make a policy statement. The statute authorizing recordation of the enforcement orders states that upon recording, they “thereafter shall constitute a lien against the land...” (emphasis supplied). It would have been simple enough for the Court to construe this language as fixing the priority, as well as preempting an assertion of home rule power. But the Court chose to take a broader, more assertive approach.
This case drew amicus curiae briefs from the Florida League of Cities, Florida Bankers Association, Florida Land Title Association and others. With unprecedented numbers of municipalities across the country filing for (or considering) Chapter 9 bankruptcy protection, inventive attempts to increase revenue should surprise no one. In Florida, the action will most likely shift to Tallahassee as municipalities try to secure an express statutory super-priority or explicit home-rule power to enact one. In other states, expect to see similar judicial and legislative scenarios play out as local governments and agencies try to close their budget gaps.