In many residential mortgage foreclosures, paragraph 22 of the mortgage provides certain notice provisions with which a lender must comply before it can bring the foreclosure action. As we have previously posted , in 2014, Florida’s Second District Court of Appeal issued an opinion determining that a lender’s substantial, rather than strict, compliance with paragraph 22 notice provisions was sufficient. In good news for lenders, Florida’s Third District Court of Appeal has recently authored an opinion following this reasoning.
In Bank of New York Mellon v. Nunez , the borrowers had raised as a defense in a foreclosure action that the bank had not strictly complied with paragraph 22 notice requirements because the notice (a) did not specify the date of default, but merely said the loan was in default for failure to make required payments; (b) stated that to cure the default, the borrowers would be required to pay the outstanding balance amount plus payments that would become due during the thirty-day notice period, without specifying the amount of those payments not yet due as of the date of the notice; and (c) provided that failure to cure “would” result in acceleration, whereas paragraph 22 stated that the notice should provide a failure to cure “may” result in acceleration. At a non-jury trial, the trial court granted the borrowers’ motion for involuntary dismissal on the basis that the bank’s notice did not strictly comply with paragraph 22.
On appeal, although the appellate court acknowledged that the notice requirement of paragraph 22 was a condition precedent to the foreclosure action, the court reasoned that mortgage provisions should be interpreted as with any other contract. The appellate court therefore held that in evaluating compliance with paragraph 22, as with evaluating a party’s compliance with contractual conditions precedent in general, only substantial compliance is required. The bank had substantially complied with paragraph 22, and thus the trial court’s dismissal was reversed.
While lenders should certainly endeavor to strictly comply with conditions precedent found in their loan documents, the Nunez decision provides further support for lenders to be able to enforce their rights in a foreclosure action despite possible technical deficiencies in default notices provided under paragraph 22.