Purchasing real estate in Florida may involve several kinds of claims or liens by third parties, including the local municipality. Sometimes, the seller may not be aware a municipal lien exists, much less the buyer. Lack of knowledge is no defense to a lien. Even if everyone is unaware these liens exist, they remain an issue with conveying clear title to the property. These liens can cloud the title, like a tax lien. They can also increase the financial liability of the unsuspecting buyer after closing. Also, municipal liens can form the basis of a foreclosure action against the home or condo, as well.
Searching For Liens In The Chain of Title
You may know that buying a home or condo in Florida requires a “title search” of the real estate records prior to closing to make sure that there are no claims against the property, like unpaid property taxes or contractors who the seller has failed to pay.
As part of the closing process, the buyer has a title search performed by a Florida real estate attorney or title company. The title search combs through the county records and reports on any lien recorded against the property. According to most standard residential real estate contracts, the seller is required to satisfy any liens against the property, or the buyer may walk away from the deal because the seller cannot provide “clear title” to the property. See, How Important is Title in a Florida Residential Real Estate Closing?
City Hall for the City of Coral Gables, Florida
Unrecorded Claims Against The Home Or Condo
Florida home buyers and sellers may sigh with relief if the title search comes back clean. There’s no lien filed against the home or condo, so there’s no claim by a third party against the real estate, right? Wrong.
In the State of Florida, municipal liens may not appear in the title search. They may not be filed in the real estate records, so they don’t appear in the title research done at the county clerk’s office. Also, they are not covered by title insurance, as most title insurance policies exclude claims related to municipal liens.
What Is A Municipal Lien?
A municipal lien is a claim against the residential property for an unpaid debt connected with the municipality in which the home or condo exists.
These are debts due and owing by the current property owner for services like, trash removal, water, sewer, and the like. However, if that owner sells the property without paying those debts, then the buyer may become liable for the unpaid debts as the new owner of the property. The buyer, as the new owner, may be surprised to find him or herself dunned for the outstanding balance due as well as potentially facing threats of foreclosure upon his new home or condo if the municipal lien is not paid in full.
11 Reasons For A Municipal Lien Search
A Florida home buyer that pays for a Municipal Lien Search will have a written report from the municipality, via a third party vendor, for all municipal claims against the home or condo. Municipal lien searches are not very expensive, (less than $500), and it should not take a long time to complete (less than 10 days).
Here are eleven (11) reasons for a municipal lien search to be done in a Florida residential real estate transaction:
1. Real Estate Property Taxes
The municipal lien search will reveal information for the past few years regarding property taxes, including things like any unpaid and delinquent property taxes, as well as the total current amount of real estate property taxes due and owing at the time of closing.
2. Unrecorded Municipal Debts
The city can assess fines for violations of its ordinances. The municipal lien search reveals the unpaid municipal debts claimed against the property along with the necessary pay-off information.
3. Unrecorded County Debts
There may also be unpaid debts assessed against the home or condo by the county. The municipal lien search discloses the unrecorded and unpaid county debt and provides the information on how to clear the debt.
4. Building Code Enforcement Violations
The city can assess fines for violations of its building codes. These may increase in time, as the fines increase while becoming more and more delinquent. The municipal lien search reveals the unpaid building code violation and provides the necessary pay-off information.
5. Open City Permits
Sometimes, building permits are requested by property owners that are open at the time of closing. The municipal lien search reveals any open city permits and instructs on their resolution.
6. Expired Municipal Permits
Sometimes, city permits are requested by property owners that have expired at the time of closing. The municipal lien search reveals expired city permits and explains how they can be resolved.
7. Special Assessments
The city may not record its assessments against the property in the land records, but the unrecorded special assessment is still legally binding. Special assessments will be revealed in a municipal lien search so the special assessments can be paid in full and the matter resolved.
8. Water Utility Balances
If there is an unpaid water bill for the house or condo, then that utility bill will show up in a municipal lien search, allowing the bill to be paid in full before closing.
9. Sewer Utility Balances
Utility bills that are past due can also include a balance for sewage and sewer services. The municipal lien search should identify the sewer utility balance so the debt can be paid.
10. Solid Waste Utility Balances
Municipal lien searches will report any outstanding or delinquent solid waste utility balances applicable to the property, as well as the steps necessary to clear the unpaid debt.
11. Storm Water Utility Balances
Storm water utility bills can be unpaid and past due and a Florida municipal lien search will find this unrecorded debt against the residential property as well as providing instructions on how to resolve it.
What About The Real Estate Agent, The Closing Agent, Or Title Insurance?
In a Florida residential real estate transaction, buyers and sellers often rely upon their real estate agents or closing agents to handle details for them like investigating unrecorded claims like municipal liens. These professionals may advise them on the importance of a municipal lien search, of course, and recommend a municipal lien search be performed.
However, the prudent home buyer will research things for himself, and understand the need to investigate unrecorded claims against the home or condo he is buying. This is because it will be the buyer, not the agent, who is liable under Florida law for that unrecorded debt after closing. The buyer cannot sue the real estate agent for failure to recommend or to undertake a municipal lien search.
What about the title insurance? In Florida, the standard title insurance policy protects against recorded information, and things that are found in the research of the public records for the home’s recording district. The title policy, as a general rule, does not cover and exempts from insuring unrecorded liens and other claims against the real estate.
Florida Real Estate Lawyer Can Help With Unrecorded Municipal Liens
Bottom line, if the buyer of a Florida residential property fails to pay for a municipal lien search and is surprised with a claim after closing, the buyer cannot seek damages from the title company or the real estate broker. The buyer may or may not have a claim against the seller; this will depend upon the circumstances of the transaction.
However, the buyer will have legal liability for that municipal lien and the claim for payment it represents.
Getting help from an experienced Florida real estate lawyer is important to learn about your legal rights regarding the residential closing process, generally, including liens on the property. An attorney involved in your closing will know to insist upon a municipal lien search, for example.
It may be necessary to litigate your rights regarding the lien itself after the transaction has closed. Is the lien valid? Should it be challenged? Is there a foreclosure threat based upon the municipal lien? Do you need to mount a foreclosure defense?
Most Florida real estate lawyers, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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