Title Insurance and Closing Your Florida Home Purchase

Posted By on June 2, 2015

Last Update: 02/22/16

When you buy a house or other residential real estate here in Florida, you are buying both the land as well as the improvements to it (the building, the sewage system components buried under the house, the fence, the landscaping, etc.). If you are buying a condominium, then you are buying an ownership interest in a condominium, where you have an undivided shared interest in the common areas as well as individual ownership of your particular condo unit.

Of course, the seller can only transfer ownership what he or she owns, so it’s very important to make sure that the buyer is getting the property that he or she is paying to receive (free of any liens or encumbrances); in a real estate transaction, the buyer expects to receive “clear title” to the property.

 

Real Estate Title in Florida

To protect real estate ownership and to promote the transfer of real estate between buyers and sellers, Florida law has evolved to establish a definition for clear title. Title to real estate in the State of Florida is protected by longstanding laws and court case precedent. If there are conflicts between who is the proper owner of a piece of Florida real estate, then our courts will look to our case law for guidance on how to determine who is the lawful owner of that property.

Tax liens, mechanics’ liens, construction liens, foreclosures, inheritance, eminent domain, and other claims can be made against Florida real estate which can impact an owner’s title to the property. Normally, a seller cannot sell the land and its improvements without clear title; when an issue is found during a title search, then that issue is usually called a “cloud on the title,” and the closing is either delay or cancelled until the cloud is removed.

How a Home Buyer Protects Real Estate Title

As part of the closing process in Florida, the buyer will not only have a “title search” performed to make sure that title is clear, but the buyer will also purchase insurance to protect against any errors or omissions made in that title investigation. Title insurance protects the buyer after the closing is completed, allowing the buyer to feel safe that he or she is the legal owner of the real estate and he or she has marketable title (the home, the condo, the townhouse, the land tract where the house will be built, etc.) to the property.

What is Title Insurance?

Title insurance is an insurance policy purchased for Florida real estate (in some jurisdictions, it can include personal property, too). It is insurance that protects either owners of real property, or lenders who are making home loans or mortgages, against any claims or losses resulting from real estate title problems. If the buyer is getting a mortgage, then they can expect their lender to insist that a title insurance policy be purchased as part of the deal.

Title insurance policy premiums are part of the closing costs in a Florida home purchase. The policy is purchased as well as the “title search” which is a search of the existing real property records for the lot, tract or parcel of land.

How much do these policies cost? They are not unreasonable, and are tied to the price of the home. Title insurance rates are covered by Florida law and title insurance companies are overseen and regulated by the Florida Department of Financial Services.

Title Problems

There are all sorts of issues that are covered by title insurance, including missing or defective documents, outstanding tax bills, claims by creditors and government agencies, as well as construction related liens. In fact, some of these items can cause title to be outright void or invalid.

Examples of clouds on title include:

  • If a home owner builds a swimming pool and fails to paid the pool builder, then that builder can cloud the title by filing a claim of lien against that home and demand his bill be paid before he will release his lien.
  • If a home owner fails to pay his property taxes, then the taxing authority may file a tax lien in the real estate records for that property, clouding title until the taxes are paid.
  • If a condo owner does not pay assessments, then the Condo Board may file a claim of lien against the condo and create a cloud on the title to the condo which helps the Condo Association get paid when the condo is sold or transferred.

Because of our recording system, when liens are filed and recorded in the real estate property records, then it is easy to investigate and find what needs to be done to clear up title. Tax liens, for instance, are easy to locate allowing a buyer to insist that the seller pay off outstanding property taxes before closing.

However, there may be title issues that are not as easily discovered. Some claims may exist that are not filed in the real estate records down at the clerk’s office. For example, there may be an heir or beneficiary who appears years down the road with an inheritance claim to the lot superior to the ownership interest of the seller or someone may appear with a claim to ownership of an easement right. Thus, some issues are hard to find even during a title search. Consequently, title insurance requires a deep understanding of real estate law and so many other areas of law, including probate and construction law, just to name a few.

Title Insurance Isn’t Complete Protection Against Challenges

Title insurance works to protect buyers against these hidden dangers. However, the title insurance policy alone isn’t always enough to help a buyer who discovers that they don’t have clear title to their home after they’ve have closed the transaction.

Often, the new home owner may need to file a lawsuit against the former owner, for example, to clear the title to the property. Also, if the title company who closed the transaction knew or should have known of any title problems before closing, and they failed to notify the buyer before closing, then there may be a lawsuit against that title company for negligence.

If you or a loved one have a title question in a pending real estate transaction, or have a concern about some of the items listed on a title insurance commitment,  then it may be in your best interest to contact a Florida real estate lawyer to discuss the situation and learn what actions you may be able to take to protect your interests.

A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to at least talk with a Florida real estate lawyer. Getting someone to review all of the paperwork isn’t as costly as most of us think it is. And it’s always a lot cheaper than paying to fix a problem after a closing occurs.  Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 
 
 
 
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One Response to “Title Insurance and Closing Your Florida Home Purchase”

  1. Is Title Insurance Really Necessary? - TEAM Hughes Real Estate School says:

    […] State of Florida does not require title insurance, but they do require (not just suggest) real estate licensees advise all purchasers of residential […]

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