This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0237c.IBS
DATE: 3/9/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 237 Legal Instruments
SPONSOR(S): Civil Justice Subcommittee, Altman
TIED BILLS: IDEN./SIM. BILLS: CS/SB 286
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Civil Justice Subcommittee 17 Y, 0 N, As CS Mawn Jones
2) Insurance & Banking Subcommittee 17 Y, 0 N Lloyd Lloyd
3) Judiciary Committee
SUMMARY ANALYSIS
Section 117.285, F.S., specifically authorizes the use of remote online witnesses for the execution of estate
planning documents, including wills, if specified requirements are met. Most of these documents do not require
notarization, but all must be witnessed by either two attesting or subscribing witnesses. Section 117.285(5),
F.S., enumerates additional requirements applicable when fewer than two witnesses are physically present
with the principal. However, the term “witness” is undefined, creating ambiguity as to whether these
requirements still apply when persons are physically present with the principal and therefore “witnessing” – that
is, observing – the document’s execution but not signing the document as an attesting or subscribing witness.
Section 697.07, F.S., authorizes a mortgage or separate instrument to provide for an assignment of rents of
real property as security for repayment of the mortgage. If such an assignment is made, the mortgagee has a
lien on the rents, allowing the mortgagee to collect rent payments from the mortgagor’s tenants should the
mortgagor default on mortgage payments. Similarly, s. 702.10, F.S., provides that, in a foreclosure action, the
plaintiff may generally request that the court direct the mortgagor defendant to show cause why an order to
make payments during the pendency of the foreclosure proceedings or vacate the premises should not be
entered. However, courts have held that these sections are unenforceable against third parties who acquire
real property subject to a mortgage lien without assuming the mortgage loan’s obligations. Thus, the
mortgagee may be unable to collect payments from the third party during the foreclosure action but may still be
obligated under the mortgage contract to pay taxes on and insurance premiums for the subject property.
The Florida Supreme Court has long held that a junior lienholder may not foreclose a senior lienholder’s lien.
However, in 2021, the Fourth DCA decided Wells Fargo Bank, N.A. v. Tan, in which the court held that a junior
lienholder can foreclose the lien of a senior lienholder if it serves the senior lienholder with process and the
senior lienholder fails to appear or file responsive pleadings in court. The Tan court then applied s. 702.036,
F.S., which provides that, where a mortgage lien is improperly foreclosed, the only remedy is a claim for
monetary damages against the party responsible for the improper action if certain conditions are met, including
that the mortgagee was properly served and a final judgment of foreclosure was entered.
CS/HB 237:
Amends s. 117.201, F.S., to define “witness” as someone whose electronic signature is affixed to an
electronic record to attest or subscribe to a principal’s signature on such record.
Amends ss. 697.07 and 702.10, F.S., to define “mortgagor” to include third parties who acquire title to
or an interest in a mortgaged property, with exceptions. This may allow a mortgagee to collect
payments from a third party who is not subject to the mortgage during a mortgage lien foreclosure.
Amends s. 702.036, F.S., to provide that this section applies to final judgments of foreclosure of any
lien and authorize the award of prevailing party attorney fees. This may disincentive a junior lienholder
from attempting to foreclose a senior lienholder’s lien after the Tan decision.
The bill does not appear to have a fiscal impact on state or local governments. The bill provides an effective
date of July 1, 2023.
FULL ANALYSIS STORAGE NAME: h0237c.IBS PAGE: 2
DATE: 3/9/2023
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Witnessing of Electronic Legal Documents
General Provisions
2019 CS/CS/HB 409 created Part II of ch.117, Florida Statutes, to authorize the online notarization of
electronic documents if specified requirements are met. However, an online notary public’s failure to
comply with these requirements does not invalidate the notarial act or the electronic record; instead,
such failure may be introduced for evidentiary purposes, including to establish ch. 117 violations or to
prove fraud, forgery, or impersonation.
1
Under this part, a notary public performing an online notarization must verify the principal’s identity at
the time the principal’s signature is taken by using audio-video communication technology and record
the entire audio-video conference session during which the electronic document is executed.
2
Identity
verification must be by:
Remote presentation of a government-issued identification credential;
Credential analysis of each government-issued identification credential; and
Identity proofing in the form of knowledge-based authentication or another method of identity
proofing that conforms to statutory standards.
3
Part II of ch. 117 also allows an online notary public to supervise the witnessing of electronic
documents by the same audio-video communication technology used for online notarization.
4
The
witness may be physically present with the principal or remote from the principal if the witness and
principal use audio-video communication technology.
5
In either case, the online notary public must
verify the witness’s identity in the same manner as the principal’s identity, and the witness must be
present (whether in person or remotely) at the time the principal affixes the electronic signature and
hear the principal make a statement to the effect that the principal has signed the electronic record.
6
Application to Estate Planning Documents
Florida law specifically authorizes the use of remote online witnesses for estate planning document
execution, including wills, if specified requirements are met.
7
Most of these documents do not require
notarization, but all must be witnessed by either two attesting or subscribing witnesses, and Florida law
enumerates additional requirements that apply when fewer than two such witnesses are physically
present with the principal.
8
However, the term “witness” is undefined, creating ambiguity as to whether
these additional requirements still apply when persons are physically present with the principal and
therefore “witnessing” – that is, merely observing – the estate planning document’s execution but not
signing the document as an official attesting or subscribing witness.
9
Assignment of Rents and Payments During Foreclosure
Assignment of Rents
1
S. 117.265(9), F.S.
2
S. 117.265(2), F.S.
3
S. 117.265(4), F.S.
4
S. 117.285, F.S.
5
S. 117.285(1), F.S.
6
S. 117.285(3), F.S.
7
S. 117.285(5), F.S.
8
Id.
9
Real Property, Probate, & Trust Law Section of the Florida Bar (“RPPTL”), White Paper: Amendment to Section 117.201, Florida
Statutes, Clarifying Who is a “Witness for Purposes of Electronic Estate Planning Documents (Jan. 2023). STORAGE NAME: h0237c.IBS PAGE: 3
DATE: 3/9/2023
Florida law authorizes a mortgage or separate instrument to provide for an assignment of rents of real
property or any interest therein as security for the mortgage’s repayment.
10
If such an assignment is
made, the mortgagee has a lien
11
on the rents, which lien shall be perfected and effective against third
parties upon recording of the mortgage or separate instrument in the public records of the county in
which the real property is located.
12
An assignment of rents is generally enforceable when the mortgagor defaults on mortgage payments
and the mortgagee makes written demand for rents to the mortgagor.
13
The mortgagor must then turn
over to the mortgagee all rents in his or her possession or control at the time of the written demand or
collected thereafter (“collected rents”).
14
Further, in the foreclosure action, upon the mortgagee’s or
mortgagor’s application, the court may require the mortgagor to deposit the collected rents into the
court registry or other court-designated depository.
15
The court may authorize the use of collected
rents, before deposit into the court registry or other depository, to pay:
The reasonable expenses solely to protect, preserve, and operate the real property, including
real estate taxes and insurance;
Escrow sums required by the mortgage or separate assignment of rents instrument; and
The mortgagee.
16
The court must require the mortgagor to account to the court and the mortgagee for the collected rents’
receipt and use and may also impose other conditions on such use.
17
All moneys received by the mortgagee under this section must be applied by the mortgagee in
accordance with the mortgage, separate assignment of rents instrument, or promissory note, and the
mortgagee must account to the mortgagor for such application.
18
Any undisbursed collected rents
remaining in the mortgagor’s possession, or in the court registry or other depository, must be disbursed
at the foreclosure action’s conclusion in accordance with the court’s final judgment.
19
Payments During Foreclosure Action
Florida law generally authorizes the plaintiff in a foreclosure action to request that the court enter an
order directing the mortgagor defendant to show cause why an order to make payments during the
pendency of the foreclosure proceedings or an order to vacate the premises should not be entered.
20
A
mortgagor defendant’s:
Right to be heard at the hearing to show cause is waived if the mortgagor defendant, after being
served with an order to show cause, engages in conduct that clearly shows that he or she has
relinquished the right to be heard on that order; and
Failure to file defenses or to appear at the hearing presumptively constitutes conduct that clearly
shows that the mortgagor defendant has relinquished the right to be heard.
21
10
S. 697.07(1), F.S.
11
A lien is a claim against property that evidences a debt, obligation, or duty. Fla. Jur. 2d Liens s. 37:1.
12
S. 697.07(2), F.S.
13
S. 697.07(3), F.S.
14
Id.
15
S. 697.07(4), F.S.
16
Id.
17
Id.
18
S. 697.07(8), F.S.
19
S. 697.07(5), F.S.
20
S. 702.10(2), F.S.
21
Id. STORAGE NAME: h0237c.IBS PAGE: 4
DATE: 3/9/2023
If the court finds that a mortgagor defendant has waived the right to be heard, the court may promptly
enter an order requiring payment in the amount specified or an order to vacate the property.
22
However,
if the court finds that a mortgagor defendant has not waived the right to be heard, the court must, at the
hearing on the order to show cause, determine the probable validity of the underlying claim against the
mortgagor defendant and his or her defenses, if any.
23
If the court determines that the plaintiff is likely
to prevail in the foreclosure action, the court must order the mortgagor defendant to make payments to
the plaintiff.
24
Under such an order:
Payments are payable at such intervals and in such amounts provided for in the mortgage
instrument before acceleration or maturity;
The payment obligation commences from the date of the motion filed under s. 702.10(2), F.S.;
and
Payments must be credited against the mortgage obligation in accordance with the loan’s terms
but do not cure any default or constitute a waiver or any other defense to the foreclosure.
25
Further, such court order:
Must be served upon the mortgagor defendant no later than 20 days before the first payment is
owed;
May permit, but may not require, the plaintiff to take all appropriate steps to secure the premises
during the pendency of the foreclosure action;
Must provide that the plaintiff is entitled to possession of the premises upon the mortgagor
defendant’s failure to make the required payments unless, at the hearing, the court found good
cause to order some other enforcement method;
26
and
Must be stayed until the foreclosure action’s completion if the mortgagor defendant files with the
court a written undertaking executed by a court-approved surety
27
in an amount equal to the
unpaid balance of the lien being foreclosed, including all principal, interest, unpaid taxes, and
insurance premiums paid by the plaintiff.
28
However, the provisions relating to payments during a foreclosure action do not apply to the foreclosure
of an owner-occupied residence.
29
There is a rebuttable presumption that a residential property for
which a homestead exemption
30
was granted according to the latest county property appraiser’s
assessment, before the filing of the foreclosure action, is an owner-occupied residential property.
31
Application to Third Parties
Borrowers who default on their mortgage payments often default on other financial obligations, leading
to the sale of the property through a foreclosure action or other sale.
32
For example, borrowers living in
a homeowners’, condominium, or cooperative association may default in paying association
assessments; such assessments become a lien on the property, which if unsatisfied, may result in the
association bringing a foreclosure action against the borrower.
33
Such borrowers may also file for
bankruptcy, resulting in the property’s sale by the bankruptcy trustee.
34
22
Id.
23
Id.
24
Id.
25
Id.
26
Should payments not be made and the premises not be vacated in violation of the order, upon the filing of an affidavit with the clerk
stating these facts, the clerk must issue to the sheriff a writ for possession. Id.
27
A surety guarantees the performance or obligations of a second party (the principal- here, the mortgagor) to a third party (the obligee
- here, the plaintiff) under a three-party contract. National Association of Security Bond Providers, What are Surety Bonds,
https://www.nasbp.org/getabond/about-surety#:~:text=A%20surety%20bond%20is%20a,third%20party%20(the%20obligee) (last visited
Feb. 14, 2023).
28
Id.
29
Id.
30
A homestead exemption is a property tax break offered based on the assessed value of a home which is the homeowner’s
permanent residence and where the homeowner was living as of January 1 of the tax year in question. Art. X, s. 4, Fla. Const.
31
Id.
32
RPPTL, White Paper: Proposal to Expand Applicability of § 697.07 and § 702.10 to Third Parties Who Acquire Properties Subject to a
Mortgage (Jan. 2023).
33
For more on assessment liens, see ss. 718.116, 719.108, and 720.3085, F.S.
34
For more on bankruptcy, see Chapters 7 and 13 of the federal Bankruptcy Code. STORAGE NAME: h0237c.IBS PAGE: 5
DATE: 3/9/2023
An investor may buy such properties for a low price because the investor takes title to the property
subject to the existing mortgage lien. In other words, the investor is not obligated to pay on the
mortgage, but, if the investor does not pay off the mortgage lien, the mortgagee may foreclose on the
lien.
35
Some such investors may vigorously fight mortgage lien foreclosure actions where the property
they purchased has a rent-paying tenant in order to maximize the rental income they can collect before
the action’s conclusion.
36
However, courts have held that ss. 697.07 and 702.10, F.S., are
unenforceable against third parties who acquire real property subject to a mortgage lien without
assuming the obligations of the existing mortgage loan. Thus, the mortgagee is unable to collect any
payments from the third-party investor during the foreclosure action but is still obligated to pay taxes on
and insurance premiums for the property.
37
Finality of Mortgage Foreclosure Judgment
The Florida Supreme Court has long held that a junior lienholder may not foreclose a senior
lienholder’s lien.
38
If somehow a junior lienholder were to improperly include a senior lienholder as a
party to its foreclosure suit and obtain a judgment purporting to extinguish the senior interest, such
foreclosure would be void ab initio as to such lienholder.
39
Thus, a senior lienholder has traditionally
been free to ignore a junior lienholder’s foreclosure action, and whoever acquired the property through
the junior lienholder’s foreclosure action would take title the property subject to the senior lienholder’s
lien.
However, in 2021, the Fourth DCA decided Wells Fargo Bank, N.A. v. Tan, in which the court held that
a junior lienholder can foreclose the lien of a senior lienholder if it serves the senior lienholder with
process and the senior lienholder defaults.
40
The Tan court then applied s. 702.036, F.S., which
provides that, where a mortgage lien is improperly foreclosed, the only remedy for the senior lienholder
is a claim for monetary damages against the party responsible for the improper action if:
The party seeking relief from the final judgment of foreclosure of the mortgage was properly
served in the foreclosure lawsuit.
The final judgment of foreclosure of the mortgage was entered as to the property.
All applicable appeals periods have run as to the final judgment of foreclosure of the mortgage
with no appeals having been taken or any appeals having been finally resolved.
The property has been acquired for value, by a person not affiliated with the foreclosing lender
or the foreclosed owner, at a time in which no lis pendens regarding the suit to set aside,
invalidate, or challenge the foreclosure appears in the official records of the county where the
property was located.
This Fourth DCA decision effectively changed the business expectations of Florida lenders by creating
a significant risk that senior lienholders may have their liens foreclosed by junior lienholders if they do
not litigate the dispute, which litigation may be costly.
41
35
RPPTL, supra note 32.
36
Id.
37
Id.; Green Emerald Homes, LLC v. Residential Credit Opportunities Trust, 256 So. 3d 211 (Fla. 2d DCA 2018).
38
Cone Bros. Const. Co., v. Moore, 141 Fla. 420 (1940).
39
Id.
40
320 So. 3d 782 (4th DCA 2021).
41
RPPTL, White Paper: Proposal to Clarify the Finality of Foreclosure Judgments – Revising § 702.036 (Jan. 2023). STORAGE NAME: h0237c.IBS PAGE: 6
DATE: 3/9/2023
Effect of Proposed Changes
Witnessing of Electronic Legal Documents
CS/HB 237 amends s. 117.201, F.S., to define “witness,” when used as a noun in Part II of ch. 117, as
someone whose electronic signature is affixed to an electronic record to attest or subscribe to a
principal’s signature on such record. This clarifies that the requirements set out in s. 117.285(5), F.S.,
apply when fewer than two persons who will affix their signature to the electronic document as an
attesting or subscribing witness are physically present with the principal, regardless of how many other
individuals may be physically present with the principal and observing the document’s execution.
The bill also provides that this amendment applies retroactively to January 1, 2020, as it clarifies
existing law.
Assignment of Rents and Payments During Foreclosure
Assignment of Rents
The bill amends s. 697.07, F.S., to define “mortgagee” as a person entitled to enforce an obligation
secured by a mortgage and “mortgagor” as a person who grants a mortgage or a successor in
ownership of the real property described in the mortgage. The bill also amends this section to:
Allow the court to authorize the use of collected rents, before deposit into the court registry or
other depository, to pay homeowners’, condominium, or cooperative assessments that come
due after the entry of the court’s order.
Specify that this section does not apply to a homeowners’, condominium, or cooperative
association that:
o Takes title to the property through the foreclosure of its assessment lien, or a deed in
lieu of foreclosure, if the title remains vested in the association and any rents collected
are applied to the assessments owed; or
o Collects rents from tenants in a parcel or unit where the owner is delinquent in paying
assessments owed to the association.
This allows an assignment of rents provision to be enforceable against third party investors who buy or
otherwise acquire title to real property subject to a mortgage lien without assuming the obligations of
the existing mortgage loan but creates an exception for homeowners’, condominium, and cooperative
associations so that they can continue to collect assessments owed where they would otherwise be
impacted by these changes.
Payments During Foreclosure Action
The bill amends s. 702.10, F.S., to define “mortgagor” as a person who grants a mortgage or a
successor in ownership of the real property described in the mortgage but specifies that the term does
not include a homeowners’, condominium, or cooperative association that:
Takes title to the property through the foreclosure of its assessment lien, or a deed in lieu of
foreclosure, if the title remains vested in the association and any rents collected are applied to
the assessments owed; or
Collects rents from tenants in a parcel or unit where the owner is delinquent in paying
assessments owed to the association.
This gives the mortgagee the ability to seek a court order to collect payments from third party investors
who buy or otherwise take possession of real property subject to a mortgage lien without assuming the
obligations of the existing mortgage loan. It also creates an exception for homeowners’, condominium,
and cooperative associations so that they can continue to collect assessments owed where they would
be otherwise impacted by these changes.
Finality of Mortgage Foreclosure Judgment
STORAGE NAME: h0237c.IBS PAGE: 7
DATE: 3/9/2023
The bill amends s. 702.036, F.S., to:
Provide that it applies to final judgments of foreclosure of any lien, not just a mortgage lien; and
Create a two-way attorney fee provision authorizing the prevailing party in an action based on
the allegedly improper foreclosing of a senior lien to recover his or her attorney fees from the
losing party.
These changes may disincentivize a junior lienholder from attempting to improperly foreclose the lien of
a senior lienholder, whether or not the senior lien is a mortgage lien, thus preserving the business
expectations of mortgage lenders and other senior lienholders in the State.
B. SECTION DIRECTORY:
Section 1: Amends s. 117.201, F.S., relating to definitions.
Section 2: Amends s. 697.07, F.S., relating to assignment of rents.
Section 3: Amends s. 702.036, F.S., relating to finality of mortgage foreclosure judgment.
Section 4: Amends s 702.10, F.S., relating to order to show cause; entry of final judgment of
foreclosure; payment during foreclosure.
Section 5: Provides applicability.
Section 6: Provides an effective date of July 1, 2023.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
The bill may have an indeterminate impact on local government expenditures to the extent it
reduces litigation in the state court system.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may give mortgagees the ability to recover payments from third parties during a foreclosure
action to help meet their financial obligations as to the mortgaged property while:
Preventing third-party investors from benefitting financially from delaying foreclosure actions;
and
Protecting the ability of a homeowners’, condominium, or cooperative association to recover
assessments owed to the association even where such association would otherwise be
impacted by these changes.
The bill may also preserve the business expectations of mortgage lenders and other senior lienholders
in the State and reduce their litigation exposure by disincentivizing junior lienholders from attempting to
improperly foreclose their liens, which could result in cost savings to mortgage lenders and other senior
lienholders.
D. FISCAL COMMENTS:
None. STORAGE NAME: h0237c.IBS PAGE: 8
DATE: 3/9/2023
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to affect county or municipal governments.
2. Other:
Retroactivity
A retroactive law is a law “that looks backward or contemplates the past, affecting acts or facts that
existed before the act came into effect.”
42
In determining whether a law may be applied retroactively,
courts first determine whether the law is procedural, remedial, or substantive in nature.
43
A purely
procedural or remedial law may apply retroactively, but a substantive law generally may not apply
retroactively absent clear legislative intent to the contrary.
44
The bill provides that the amendment to s. 117.201, F.S., is intended to clarify existing law – in other
words, that it is remedial in nature – and applies retroactively to January 1, 2020, the date the statute
it intends to clarify took effect.
B. RULE-MAKING AUTHORITY:
Not applicable.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On February 14, 2023, the Civil Justice Subcommittee adopted an amendment and reported the bill
favorably as a committee substitute. The committee substitute:
Restored the word “defendant” after mortgagor in s. 702.10, F.S., so that the phrase remains
“mortgagor defendant” as it is under current law.
Redefined “mortgagor” in ss. 697.07 and 702.10, F.S., to avoid using the term “mortgagor” in its
own definition.
Redefined “witness” in s. 117.201, F.S., to avoid using the term “witness” in its own definition.
This analysis is drafted to the committee substitute as passed by the Civil Justice Subcommittee and the
Insurance & Banking Subcommittee.
42
Congressional Research Service, Retroactive Legislation: A Primer for Congress, Aug. 15, 2019,
https://sgp.fas.org/crs/misc/IF11293.pdf (last visited Feb.14, 2023).
43
A procedural law merely establishes the means and methods for applying or enforcing existing duties or rights. A remedial law
confers or changes a remedy, i.e., the means employed in enforcing an existing right or in redressing an injury. A substantive law
creates, alters, or impairs existing substantive rights. Windom v. State, 656 So. 2d 432 (Fla. 1995); St. John’s Village I, Ltd. v. Dept. of
State, 497 So. 2d 990 (Fla. 5th DCA 1986); McMillen v. State Dept. of Revenue, 74 So. 2d 1234 (Fla. 1st DCA 1999).
44
State Farm Mutual Automobile Ins. Co. v. Laforet, 658 So. 2d 55 (Fla. 1995).