In short: A mortgage signed before ownership can still be valid. In BCML Holding v. Wilmington Trust, the Third DCA held that a mortgage signed five days before the borrowers took title became good once they got the deed. A later buyer from a condo association foreclosure sale was bound. Summary judgment for the lender was affirmed.
The Facts
On July 11, 2007, two buyers signed a note and mortgage on a Miami Beach condominium unit. The mortgage said they were lawfully seised of the property and had the right to mortgage it. They did not own it yet. The seller deeded the unit to them five days later, and the deed and mortgage were recorded together on August 1, 2007. The mortgage was later assigned to Citibank.
In 2010 the condominium association foreclosed for unpaid assessments, bought the unit at its own sale, and in 2012 sold it to BCML Holding. In 2013 Wilmington Trust, as successor trustee, sued to foreclose the 2007 mortgage and named BCML as a defendant.
BCML counterclaimed for declaratory relief and to quiet title, arguing the mortgage was void from the start because the borrowers did not own the unit when they signed it. The trial court ruled for Wilmington on summary judgment, holding that the later deed cured the defect under the after-acquired title doctrine.
The Decision
The Third District affirmed. Under the after-acquired title doctrine, when someone conveys property they do not yet own, with a warranty of title, and later acquires it, the title passes automatically to the person they conveyed to. Florida has long applied the doctrine to mortgages. Because these borrowers expressly warranted their title and then took the deed, a valid mortgage existed in favor of the lender and its successors.
The court rejected BCML’s argument that it was a stranger to the mortgage. As a successor in interest to the borrowers, BCML was bound by the same estoppel, especially since the deed and mortgage were recorded together five years before it bought. The court also held that the purchase-money mortgage exception did not apply. That exception covers a seller who conveys and takes back a mortgage at the same moment; here a third-party lender loaned money on a property the borrowers bought later from someone else.
The Law
After-acquired title is a form of estoppel by deed: a grantor who warrants title cannot later deny it, and title acquired afterward goes to the grantee and those claiming under the grantee. It rests on the warranty covenants in the instrument and runs with the land, binding the grantor’s successors. Florida’s statutory warranty language for deeds is in section 689.02 and section 689.03; standard mortgage forms contain their own covenant that the borrower is lawfully seised and has the right to mortgage.
Context for condo buyers: under section 718.116(5)(a), a condominium association’s lien is effective against a first mortgage of record only from the recording of the association’s claim of lien. That is why buyers at association foreclosure sales often take title subject to an earlier recorded first mortgage.
Lessons
- A defect in timing between a mortgage and the borrower’s deed is usually cured once the borrower takes title, if the mortgage contains title warranties.
- Buying at a condo or HOA foreclosure sale often means taking the property subject to the first mortgage. Check the title before bidding.
- Recorded documents put later buyers on notice. Claiming to be an innocent purchaser rarely works against a mortgage recorded years earlier.
- The purchase-money mortgage exception is narrow: it protects buyers against sellers who finance a sale of property they did not own, not against third-party lenders.
Watch the Oral Argument
This is the recording of the actual oral argument, posted on the channel. What lawyers and judges say at argument is not the ruling; the decision is summarized above.
Mortgaged Before Owning: After-Acquired Title? | BCML v. Wilmington Trust, 3D14-1627
Go Deeper
- HOA and Condo Association Foreclosure in Florida: Notice Rules and Defenses
- Florida Condo Owners' Rights: Special Assessments, Records, and Disputes With the Association
- Deed Fraud in Florida: How Homes Are Stolen on Paper and How to Get Them Back
Frequently Asked Questions
Is a mortgage valid if the borrower didn't own the property when signing it?
It can be. Under Florida’s after-acquired title doctrine, if the mortgage contains title warranties and the borrower later acquires the property, the title passes to the lender’s benefit by operation of law. In BCML Holding v. Wilmington Trust, a mortgage signed five days before the deed was held valid.
Does a condo association foreclosure wipe out the first mortgage in Florida?
Usually not. Under section 718.116(5)(a), the association’s lien takes effect against a recorded first mortgage only from when the association records its claim of lien. In BCML, the buyer from the association’s foreclosure sale still faced the lender’s foreclosure of the earlier mortgage.
What is the after-acquired title doctrine?
It is a rule of estoppel. If someone conveys or mortgages property with a warranty of title before actually owning it, and later gets title, that title automatically passes to the grantee or lender. The grantor and those who later claim through the grantor cannot deny it.
What is the purchase-money mortgage exception to after-acquired title?
Florida recognizes an exception where the seller conveys property and takes back a mortgage at the same time. That seller cannot foreclose on more title than it actually conveyed. In BCML the court held the exception did not apply to a third-party lender, even though the mortgage was labeled purchase money.
Talk to a Florida real estate litigation lawyer
Weidner Law, P.A. handles Florida real estate disputes, title problems and appeals from St. Petersburg. If you need a real estate litigation lawyer, call (727) 954-8752 or email weidner@mattweidnerlaw.com.
Read the law yourself, free: every Florida statute and court rule is on floridarules.net.
This article is general information about Florida law, not legal advice about your situation. Reading it, watching the videos, or contacting the firm does not create an attorney-client relationship. Every case turns on its own facts, and past results do not guarantee a similar outcome. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
