A property owner is preparing to sell an office building in Florida. The buyer is ready, the deal is moving forward, and the owner expects a straightforward closing. Then, a title review uncovers an unexpected problem: a recorded code enforcement lien tied to another property under the same ownership.
The office building itself has no code violations. But the lien may still encumber it, potentially delaying closing, complicating the buyer’s financing, and reducing the seller’s proceeds.
Florida real estate professionals often refer to this as a “bleeding lien,” a code enforcement lien that can reach beyond the property where the violation originated to other property owned by the same violator.
Why This Matters
For property owners, the risk may extend beyond the property with the code violation. A lien originating at one property can surface during the sale or refinancing of another, potentially creating an unexpected obstacle after a transaction is already underway. Identifying that exposure early gives owners and their advisors more time to address it before it affects a deal.
How Does a Bleeding Lien Arise?
Under Florida Statutes Section 162.09(3), a county or municipality can record a certified copy of an order imposing a code enforcement fine, or a fine plus repair costs. That recording creates a lien on the property subject to the violation and on any other real or personal property the violator owns.
Underlying violations may involve unpermitted alterations, prohibited property uses, accumulated debris, or deteriorating buildings. Monetary fines for these violations can accrue daily until the owner achieves compliance, so a lien that begins as a modest sum can grow substantially before it surfaces in a transaction.
A code violation alone does not create this statutory lien. The lien arises only after the local government completes the enforcement process and records the order. Bleeding liens also differ from many other encumbrances, such as a mortgage, which attaches only to the property it describes.
Why Ownership Structure Matters
Consider a property owner preparing to sell a retail center. During due diligence, the closing team discovers a recorded code enforcement lien arising from a warehouse. The owner views the properties as separate investments, but the deeds show that the same LLC owns both.
That ownership connection matters. If the LLC is the violator named in the recorded enforcement order, the lien may also encumber the retail center, even though the violation occurred at the warehouse. Attachment does not require the owner’s consent.
The analysis changes if separate LLCs hold title to the properties. A shared investor or manager alone does not establish that a lien against one entity extends to property belonging to another. Counsel must compare the record owner shown on each deed with the violator named in the enforcement order to determine whether the lien affects the proposed sale.
Due Diligence Should Look Beyond the Property
Because a code enforcement lien follows the violator, due diligence should address both the property and potential claims against its owner. Lien searches should run against the owner’s name, not only against the parcel under contract.
Title professionals and municipal search providers help identify recorded liens and code enforcement matters. Commercial real estate counsel can coordinate the scope of those searches, review the findings alongside ownership records, and determine whether an obligation arising elsewhere affects the transaction.
Timing also matters. Municipal lien searches can take time to return, and a fine reduction often requires a hearing before the code enforcement board or special magistrate. Ordering searches at the start of the due diligence period, or before listing a property, gives the parties more time to resolve complications before closing deadlines.
Address the Risk Before Closing
A bleeding lien can force buyers and sellers to address an issue they may not have anticipated when negotiating the transaction. Identifying potential exposure early gives the parties more time to understand the obligation, determine how to resolve it, and keep the transaction moving.
Real estate counsel can evaluate the lien’s validity and reach, coordinate with title professionals and the local government, and chart a path to resolution. That path may involve correcting violations, requesting a fine reduction, negotiating a payoff, and securing a recorded release. Correcting the underlying violation alone does not necessarily extinguish the lien. The lien typically remains of record until the local government records a release or satisfaction.
The purchase agreement should also establish responsibility for resolving the lien and address what happens if the parties cannot complete the lien resolution process before closing, whether through an escrow holdback, a price adjustment, or an extension of the closing date. A bleeding lien that is not resolved at closing continues to attach to the property after the sale. If the lien is not released or otherwise resolved, the buyer may take title subject to it and could be left with the responsibility of resolving it after closing.
Before buying, selling, or refinancing commercial property, contact Vanessa Bertran at Agentis to evaluate potential lien exposure and address title issues before they disrupt your transaction.
About the Author
Vanessa M. Bertran is a Partner at Agentis whose practice encompasses a significant range of real estate matters. She represents clients in commercial and residential purchases, sales, refinancings, and closings, as well as sophisticated commercial foreclosure litigation and real estate operational matters. Vanessa also advises clients regarding commercial leases, landlord-tenant disputes, zoning and land use matters, brokerage issues, construction and lien issues, code compliance, and the acquisition and restructuring of distressed real estate assets and loans. She is President of the Attorneys’ Real Estate Council of Miami-Dade County and serves on the Florida Realtor-Attorney Joint Committee and the Florida Bar Real Property, Probate and Trust Law Section’s Uniform Title Standards Revision Committee.