Code Violation Liens in Florida

[Chad U.]

Hi BP,

Here is my dilemma, I won an Auction.com property which states they will be providing a SWD and insurable title, yet the addendum supplied by the bank in the purchase agreement states: "BUYER UNDERSTANDS AND ACKNOWLEDGES THAT THE PROPERTY MAY CONTAIN MECHANIC’S OR MATERIALMEN’S LIENS OR OTHER LIENS RESULTING FROM ALLEGED VIOLATIONS OF LOCAL ORDINANCES AND BUYER IS TAKING SUCH PROPERTY SUBJECT TO THOSE LIENS, WHICH MAY OR MAY NOT IMPACT BUYER’S ABILITY TO TRANSFER THE PROPERTY IN THE FUTURE."

After speaking with several reps at Auction.com, they assured me that their instructions from the bank are that all liens will be cleared at closing.  This is obviously a contradiction to what is in the addendum, and I've asked them to give me written confirmation stating as such rather than just a verbal to which they are not able provide.  They also emailed me to say that since an insurable and marketable title will be provided, then if they are unable to do this then they would cancel the transaction. But my concern is this code lien is listed as a possible Exception in the title commitment and if I sign the addendum with the current wording this would waive my right so I'm obviously not signing as is.  

HOWEVER, as we've debated and discovered in the past in reference to City of Palm Bay v. Wells Fargo Bank, seen here: https://www.floridabar.org/DIVCOM/JN/JNJournal01.n...

code violation liens get wiped out at foreclosure in the state of Florida.  But in reviewing the foreclosure file, the county where this lien was imposed was not named or joined as a Defendent.  My question is, should they be named in the foreclosure action in order for this lien to be extinguished?  

This fine is not small - $328K, and after speaking with the code enforcement supervisor, she advised that these liens are generally reduced down to 10% which is still a signficant amount, and much more than the equity/profit in this deal. Of course, Auction.com wants this purchase agreement signed asap and EMD sent within 24 hrs, but I've been stalling until I get this sorted. My title co is not familiar or able to give advice, nor is another RE lawyer I spoke with.

Any words of wisdom from @Steve Babiak @Wayne Brooks @Patrick L.?   

[David Dey]

@Wayne Brooks the contract probably does say that, but fraudulent inducement should trump contract clauses.  

If you can get them to promise you that the code violations will be cleared and that the bank has given instructions to fully clear the title including these liens, you should be able to rely on their representation to enter the contract.  

As @Steve Babiak mentioned in the post above ours.  The bank is likely to just send back the same contract.  

If @Chad U. wants to not lose the deal, and wants to try to move forward with it, this is the way to do it.  

This way, the bank isn't gonna wanna try to withhold the small deposit and risk that strong a stance.  

Also, Chad will have a strong stance to sue for performance if it comes down to it.

Of course, the fact that this is a code enforcement violation has been "cured," most municipalities will reduce the lien to admin costs and such which you can help negotiate and the bank will likely be willing to pay once reduced....

ORRRR, Chad may even offer to take the property subject to the lien for a steep discount.  (Again, having verified from the municipality that they will negotiate)

I did that with a 10 unit apartment complex here in central FL where I got the seller to sell me the property for 25k subject to over 300k code lien that was accruing at $300 per day.  (Long story short, I was able to get the lien reduced to 1k!!  Talk about a short sale)

Anyway, I hope this helps!!