August 20, 2023

Updated Laws for Serving Florida Corporations Should Assist Lenders in Foreclosure Actions

KK Takeaway:
New laws enacted in Florida help streamline service of process requirements and processes, especially when a corporate entity is avoiding being served.

Background:

The Florida legislature recently amended the laws which govern procedures and methods for service of process on corporate entities. While not a change that made the most noise when becoming effective, its impact on contested residential foreclosure actions is substantial and every attorney representing lenders in Florida needs to be aware of the changes.

The updated law, which became effective on January 2, 2023, simplifies and streamlines the manner of service of process on business entities.

Business entities – specifically Limited Liability Corporations (“LLCs”) – often challenge foreclosure actions after they become owners of properties in foreclosure from junior lien sales or other conveyances of the property before a foreclosure action’s Lis Pendens is filed.

Part of the LLC’s efforts to contest the case often involves avoiding service of process as their Registered Agents are sometimes hard to locate and serve.

Before the subject law was changed, LLCs would be able to avoid service of process to the point where the lender Plaintiff would be forced to amend their complaint to serve the Registered Agent of the LLC through the Florida Secretary of State.

Florida law traditionally provided for the alternative of substitute service of process on the Florida Secretary of State under F.S. §§48.061 and 48.081 if a party could not through reasonable diligence secure personal service of process on a business entity, if a foreign entity doing business in this state failed to have an active registered agent in this state, or if an individual concealed itself.

This procedure often caused months of delay and extensive fees and costs for the lender Plaintiff. This issue caught the attention of the Business Law Section of The Florida Bar when it was working to propose amendments to the Florida Business Corporations Act, F.S. §607. Other sections of the bar also eventually chimed in on the effort to streamline these issues.

As part of an effort to amend the Act, the Business Law Section studied and proposed legislative changes to the statutes regarding service of process and observed that a number of laws dealing with serving corporations conflicted each other, which caused confusion.

The Business Law Section came up with a direct approach with three layers, summarized as follows: 1) Service on the registered agent is preferred and should occur first; 2) Service on the entities’ representatives should be next; and 3) if the first two approaches fail, service on the secretary of state or alternative service including through electronic means could be obtained.

The legislature therefore updated subsection (1) of F.S. §48.161, to amend it to provide the ability to serve process on the secretary of state through electronic filing as well as personal service, or through certified mail or courier service.

Subsection (2) of the statute was then amended to, interestingly, allow notice to be sent by e-mail or other electronic means if those means have been used by the parties recently and regularly to communicate between or among themselves. In other words, the issue of technical gotcha tactics companies avoiding service has been mitigated.

Additionally, the amended subsection (2) eliminates any need for the complaint to be amended to reflect those facts as long as an appropriate affidavit of diligent search is filed.

An additional related statute, F.S. §48.102, allows a party to file a motion with the court after it has been unable through due diligence to secure personal service on a defendant that is a business entity through traditional means to allow service “in any other manner that the party seeking to effectuate service shows will be reasonably effective to give the entity on which service is sought to be effectuated actual notice of the suit,” including “electronically by e-mail or other technology.”

In other words, if counsel for the parties had been communicating, it is likely possible a party attempting service could file a motion to allow service of process through counsel.

These updated laws substantially change the process for serving a corporate entity, especially on which is avoiding service of process. Such should help lenders obtain jurisdiction over corporate parties so the foreclosure action can proceed more efficiently.

Jason D. Silver
Attorney, Real Estate
Kelley Kronenberg-West Palm Beach
(561) 684-5956
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