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Armando Rosquete, Key words: Sequestration of Rent, Assignment of Rents, Section 697.07(1) Fla Stat. Third DCA Issues Opinion Regarding Sequestration of Rents, Joining the Second and Fourth DCAs in Requiring that the Rents be the “Subject of the Litigation” or the Subject of an Assignment of Rents.

Rents, Sequestration, In UV Cite III, LLC v. Deutsche Nat’l. Trust Co. (No. 3D16-2341) (Luck, J.), the Third District Court of Appeal (“DCA”) reversed a trial court’s non-final order in a residential-foreclosure case requiring the defendant to deposit its rents into the court registry while the case was pending.  The trial court’s order arose after the plaintiff moved to “sequester” the rents that defendant was collecting from the condominium’s tenants.  After a hearing, the trial court ordered the defendant to “pay all rents due each month…under the subject lease into the Court Registry” and its order provided that at the conclusion of the case “all sums deposited into the Court Registry [would] be released to Plaintiff or other prevailing party.”

The Third DCA reversed the trial court’s order “because, absent an agreement between the parties to assign rents or some form of injunctive relief, a trial court has no authority to order a deposit of money into the registry of the court if the money was not the subject of the litigation.” (emphasis added).  Here, the plaintiff did not have a “mortage or separate instrument” that provided for “an assignment of rents of real property … as security for repayment of an indebtedness” as allowed by Section 697.07(1) of the Florida Statutes.  The Third DCA also noted that plaintiff’s complaint only sought to foreclose on the mortgage (count one) and to reform the mortgage (count two) and deed (count three).  Plaintiff did not seek a judgment for the rents that the defendant collected, and the rent was not part of any of the three causes of action alleged.   Accordingly, given the causes of action alleged and the absence of an assignment of rents or some form of injunctive relief,  the rent payments were “not the subject of the litigation” and there was no other standalone basis for sequestering the money.

Takeaways:  Ideally, a party seeking “sequestration of rents” would have an assignment of rents from the other party.  Thus, an assignment of rents should be discussed, if at all possible, at the time that the parties enter into the contractual or lending relationship. Further, based on the cases cited by the Third DCA, rent payments would be considered “the subject of the litigation” if the party seeking the rents sought a monetary judgment for the fair rental value of the property, but not if its payment “is an incident [to the litigation], dependent on the judgment to be rendered in the action, as in the case of an action for redemption, specific performance, accounting, rescission or the like.”

A link to the opinion can be found at: http://www.3dca.flcourts.org/opinions/3D16-2341.pdf.

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