The Loan Documents Encumber Real Property in Two Separate Florida Counties. How Many Foreclosure Actions Are Necessary, and Where Should the Lender File the Action(s)?

Commercial lenders frequently collateralize multiple properties as part of making loans to borrowers. Even if a loan does not begin with a mortgage interest in multiple properties, sometimes loans become cross-collateralized and, therefore, end up covering multiple properties in different locations. So what happens when a borrower defaults and the lender needs to pursue foreclosure of multiple properties located in different Florida counties? May the lender file just one foreclosure action and, if so, where?

In what is perhaps a timely reminder of the “local action rule” in Florida—and we say “timely reminder” because of the likely forthcoming wave of commercial real property foreclosure actions due to the economic fallout from the ongoing pandemic—the Fourth District Court of Appeal in Florida recently issued an opinion in a foreclosure action that involved four separate properties located in two different counties. The opinion concluded that cross-collateralized mortgages should be construed as one instrument, pursuant to which a trial court sitting in one county may exercise subject matter jurisdiction over real property located in another county. See Brant, as Trustee v. Metropolitan Life Ins. Co., Case No. 4D20-1207, 45 Fla. L. Weekly D2168a (Fla. 4th DCA Sept. 16, 2020) (denying writ of prohibition sought by borrower challenging the trial court’s determination that a court sitting in Martin County could maintain subject matter jurisdiction over real property located in Okeechobee County).

The “local action” rule in Florida generally requires that a foreclosure action involving real property must be filed in the county where the property is located. This is a simple rule that establishes which court has subject matter jurisdiction over a foreclosure action, but the simple rule begs the question of what happens when multiple properties are involved. The answer to this question is fairly straightforward: pursuant to Fla. Stat. § 702.04, when a mortgage includes more than one property lying in more than one county, the foreclosure action may be filed in any of those counties. In Brant, the appellate court’s specific holding was the following:

Based on the foregoing, we affirm the Martin County-based circuit court’s order denying the borrowers’ amended motion to dismiss. As the court found, the cross-collateralized mortgages should be construed as one instrument, and thus the court had subject matter jurisdiction over the entire action, including the mortgage encumbering the Okeechobee County property.

Brant, at *3.

The motto of this story: if the loan documents encumber real properties in more than one Florida county, or if multiple sets of loan documents cross-collateralize real properties in more than one Florida county, then the lender likely may file just one foreclosure action in one of those counties seeking foreclosure against all of the properties.