Tuesday, April 17, 2007

Florida Court Rules That "Foreclosure Rescue Eviction" Not A Landlord-Tenant Matter

A Florida appellate court ruled last month that a Miami-area foreclosure rescue operator cannot evict a homeowner who signed away title to her home in a "sale-leaseback-buyback option" arrangement until a determination is made as to who the true owner of the property is and effectively ruling that the Florida Residential Landlord Tenant Act is not applicable to such a transaction unless and until such a determination favorable to the operator is made.

The case involved a situation where, at some point after a financially strapped homeowner signed away the title to her home to a foreclosure rescue operator, the operator attempted to evict her. The homeowner asserted the defense that she was the true owner. The lower court ruled that, pursuant to the applicable provisions of the Florida Residential Landlord Tenant Act, she had to pay into the court registry the rent that was called for in the leaseback of her home while the court proceedings were pending.

According to the appellate court's opinion:
  • "[The homeowner] alleges she was tricked into conveying her home to Equinamics in a transaction which is impressed with characteristics of a sale, but in reality is a disguised loan secured by her home. If this is accurate, then Equinamics is not an owner of [the homeowner's] residence but rather a lender who must proceed to oust [her] via a foreclosure action."
The court then made this observation:
  • "Based upon the facts of this case, it is apparent that the transaction by which Equinamics received title to the Minalla residence was not an ordinary real estate transaction. Likewise, the circumstances under which Minalla continued to remain on the property after she executed the special warranty deed to Equimanics was not possessed of the trappings of a usual landlord tenant relationship."
Ultimately, in reversing the lower court ruling to the contrary, the appellate court ruled as follows:
  • "[T]here is a factual dispute in this case concerning who is the true owner of the property. Because the trial court's order requiring payments by Minalla of monies into the registry was made without conducting an evidentiary hearing concerning the nature of the transaction and who is the true owner of the residence, the court erred in imposing the payment requirement upon her."
The homeowner is being represented by attorney James A. Bonfiglio, Boynton Beach, Florida.
Minalla v. Equinamics Corp., (Fla. App. Ct., 3rd Dist. March 21, 2007) (Court decision made available online courtesy of the Florida Third District Court of Appeal)

Postscript:

The court in this case reveals the following in a footnote:
  • that the homeowner has brought claims against the foreclosure rescue operator under the Federal Truth in Lending Act giving her a right to rescind under 15 U.S.C. § 1635 and Reg. Z 226.23, and damages under 15 U.S.C. § 1640 (a);
  • that the arrangement is alleged to be a Home Ownership and Equity Protection Act Amendments (HOEPA) loan under 15 U.S.C. § 1602 (aa) and Reg. Z 226.31, giving right to an additional basis to rescind under § 1635 and enhanced actual damages under § 1640 (a)(4);
  • that the arrangement is alleged to violate Florida's usury statute, § 687.02(1), Florida Statutes (2005);
  • that the homeowner has brought a quiet title claim; and
  • that the homeowner seeks declaratory relief on the basis that enforcing the arrangement as a true "sale lease option" would enforce an illegal equity skimming contract in violation of section 697.08, a third degree felony, which it claims allows Minalla civil damages as being "against public policy.
There seems to be some pretty interesting issues for Florida practitioners in this case, particularly the usury and illegal equity skimming claims coupled with the equitable mortgage / disguised loan issue. This may be a case worth keeping an eye on.
For more on attorney James A. Bonfiglio, see:

posted by Home Equity Theft Reporter at 12:03 AM