A Beginner’s Guide To Florida Title Insurance Law

What is title insurance law?

In essence, a title is the basis for owning property. If you buy a home, you should receive a title. This proves your right to own the property and use it. Keep in mind that how you use a property depends on zoning regulations for the property. This means that if the land is supposed to be a residential property, you can’t turn it into a business or vice versa.

When purchasing a property, it’s important to have a real estate lawyer familiar with title insurance by your side. Generally, the person who pays the insurance can choose who the title agent is but the other party must agree to it. It is possible for both the buyer and the seller to make use of different agents. There are also varying agencies that help regulate title insurance law in Florida.

Why Do I Need A Real Estate Lawyer Familiar With Title Insurance?

It is never advisable to sign any document, without consulting a lawyer. Your real estate lawyer will be able to understand the finer nuances of the agreement. They will also ensure that you are not at a disadvantage during closing.

Remember that you are liable if you sign the contract without any legal advice. If you are later unhappy with the terms, you will end up in a lengthy legal battle to amend the terms of the contract.

What Is Title Insurance?

Of all the hidden closing costs and fees, title insurance is probably the most valuable to you as the buyer. In a nutshell, title insurance insures the owner of a property against loss arising from any title defects, encumbrances, liens, and other legal claims against the property that only come to light after closing (these are also known as ‘title hazards’). In other words, if anything goes wrong in your real estate transaction after closing, you as the buyer will be protected from any loss that you suffer as a result.

Title insurance is indemnity insurance that protects both lenders and homebuyers in the unfortunate instance of a defective title to a property. The policy protects both lenders and buyers from potential financial loss in the instance of property title defects. In most instances, title insurance claims include back taxes, liens, and conflicting wills.

Title insurance involves a one-time fee for all necessary administrative tasks. The end result is a title insurance policy that covers various risks such as faulty records, incorrect ownership, and falsified documents.

Understanding The Risk That Title Hazards Present

One reason why many homebuyers don’t appreciate the importance of title insurance is that they don’t fully understand the risk that title hazards present. To have a clear ‘title’ to a property means that you have ownership rights over the property. It is your title to a property that gives you the legal power to possess it, make alterations to it, use it as collateral, lease it, sell it, and otherwise deal with it as you wish. If it turns out that your title is in some way defective, then, regardless of the market value of your home, your real estate investment will come to naught.

So, what are the hidden ‘title hazards’ that could impact your real estate investment in this way? One possible title hazard is an undisclosed lien. If it turns out that the property is subject to a lien that the seller failed to disclose, then the transfer of ownership of the property from the seller to you could be invalid. Another title hazard is a forged signature on the title deed or a fabricated power of attorney authorizing the seller’s agent to sign the deed. If the seller’s signature on the deed turns out to be forged, or the signatory’s power of attorney is discovered to be fake (or has simply expired), the transfer of ownership will be invalid. Unpaid property taxes and utilities are other potential title hazards. Even small clerical errors in public records relating to the property could negatively impact your title.

How Title Insurance Works in Florida

The premiums to be charged for title insurance are set forth by the Florida State Insurance Department, as with all insurance. This set rate is known as “promulgated rate”. Florida law (Statute 627.7711) stipulates that all real estate transactions need a title insurance policy, either an owner’s or lender’s coverage policy. However, it doesn’t determine how much to purchase.

In some states, title insurance companies are not able to conduct a closing. However, Florida attorneys can act as title underwriters and can provide both legal representation and obtain title insurance at the closing.

The Florida Bar refers to Florida Southern that says, “It is well established that a title insurance company acting as a closing agent has the duty to supervise a closing in a ‘reasonably prudent manner'”. Also, the role includes the “duty to prepare the closing documents in accordance with the contract.”

The Different Types of Title Insurance Policies

Depending on where you stand when it comes to purchasing or selling a property, there are different title policies that would apply.

• Owner’s title insurance protects the buyer against faults in the title. Owners’ policies will protect the buyer in the event of a bad title. If the worst possible outcome occurs and you lose your home to a competing title claim, your insurance policy will usually entitle you to claim the purchase price you paid for it from your insurer. Owners’ policies do not expire until the property is sold to someone else.
• Lender’s title insurance protects the lender against issues with the transfer of ownership rights. Most banks will require you to obtain lender’s insurance as a condition to granting you a mortgage, and it protects their security interest in the property. Lenders’ policies will come to an end once the loan is repaid.
• Leaseholder’s policy protects owners who rent out their properties.

Title insurance policies protect you from bad titles. It also protects both you and the lender from any financial loss. The policy ensures that no legal rights have been violated while creating or transferring property ownership.

How Title Insurance Protects You

While your real estate attorney or title company will conduct a thorough due diligence and carefully scrutinize the seller’s title deed before you close your real estate transaction, some title hazards cannot be discovered with even the most comprehensive public record searches and document review. If a title defect emerges after your real estate transaction closes, the impact could be financially disastrous. Imagine finding out that you are liable for years of unpaid property taxes on your home, or worse, that you are not the legal owner of your home after all because an unknown heir has made a claim to the property?

Thankfully, with a title insurance policy behind you, you will be covered against these risks. Depending on the coverage of your policy, you will be covered for the legal fees you incur to defend your title to the property, and for any legally valid claims you are required to settle in order to retain your title (for example, unpaid property taxes). If the worst possible outcome occurs and you lose your home to a competing title claim, your insurance policy will usually entitle you to claim the purchase price you paid for it from your insurer.

It is important to understand that title insurance is a one time premium that will cover you for any title problems from the past that affects your title now. You are assured that you own the property, free and clear of any liens or other encumbrances as of the date that you take title. It does not protect you from liens that may result after you own the property from anything that you may cause, such as unpaid taxes or liens after you own the property.

What Is A Bad Title and How Does It Affect A Property?

A bad title may prevent you from ownership of the home as well depriving you of the ability to sell it. This means that even if you’ve paid for the home, you legally do not own it. This can happen when there are overdue taxes and liens against the property. It can also occur if there are ownership disputes.

There is a downside to “owning” a property with a bad title. In the case of a bad title, you legally do not own the property, so you may not be able to sell the property at a later stage.

Understanding Title Clouds and Defects

Are title clouds over your property affecting the way you perceive its value? Is that cloud preventing you from listing your premium property or selling it? If you’re trying to sell a property, it is important to have a clean title. Any homeowner will need to consider the possibility of having to fight a legal dispute over the property itself or a claim of ownership. This insurance protects you and your home if such a claim arises, and you have no other option but to seek out justice through litigation.

When you own a home, there is a good chance that you’ll be selling it at some point. Whether it’s because of a foreclosure or illness, title clouds often appear on the horizon. At first, they’re merely a concern — an inconvenience that you must address before you move forward with closing on the property. However, as the days go by and more time passes without a resolution, those concerns may grow larger and more difficult to deal with.

Title clouds are serious, and they can jeopardize the sale of any property. Some causes of clouds on titles include:

Liens

A lien creates a cloud upon your title that requires payment or satisfaction so that you can convey clear title. Liens can vary from judgments, mechanic’s liens for work done to the property, mortgages to renovation and repair money you owe your contractor. Tax liens can also create a problem regarding your property when you are about to sell it, refinance it or leave it to your loved ones upon your death.

Illegal Deed

An illegal or forged deed may occur if the signature of the previous owner was forged or the prior transferor or grantor of your property transferred the property to you illegally without the actual owner’s knowledge. Your deed may also be illegal if you acquired your property from a minor or a married person without the knowledge of their spouse.

Foreclosure Errors

A foreclosure that didn’t follow the proper procedure can cause a title defect in the future. Foreclosure errors can last for a long time and can cause property disputes even if you are purchasing a property that was foreclosed a long time ago.

Besides the above issues, other causes of title clouds may include forgery, property inheritance disputes, survey and boundary problems, deed errors, among others.

When in possession of any property, you need to have peace of mind and assurance that you will be safe from any past or current title issues that will cause you a problem in the future. Therefore, it is necessary to request a licensed title professional to help you conduct a title search to find out any issues that might affect your property ownership in the future. The professional will guide you to resolve liens and remove clouds just in case they find any. However, some errors may be too hidden to be discovered by title companies. This is where insurance on your title comes in. This policy may help you by covering:

• Inheritance disputes
• Liens
• Deed errors
• Illegal deed transfer
• Forgery or fraud
• Borderline and survey disputes

The Role of the Title Insurance Company

Buying and selling property can be an overwhelming experience. The process demands careful attention be paid to legal agreements and ensuring protection for those involved. The process climaxes when both parties sign on the dotted line, but it doesn’t always go according to plan – and that’s where a title insurance company comes in.

A title insurance company plays a key role in navigating title insurance to reduce risk and maximize protection. A title insurance company fulfills various roles to make sure that there are no legal hiccups and financial losses during the transfer of ownership. Understanding the responsibilities of a title insurance company empowers you to make confident decisions when buying or selling a home.

Conduct a Title Search

A title search ensures that the seller has full rights to sell the property. The title company will search public records and assess all legal documentation to ensure that there are no ownership issues.

Documentation such as deeds, mortgage documents, tax records, marriage records, and probate records are reviewed during the title search process.

Potential obstacles that need to be finalized during the title search process include:

• Outstanding mortgages need to be closed
• Judgments or unpaid tax liens need to be closed
• Other existing liens, such as a loan to pay solar panels, need to be paid
• Unpaid Homeowners Association dues need to be settled
• Easements need to be addressed, such as permitting third-party parking on the property
• Lease agreements that implicate a third-party need to be finalized

Once all of these documents are cleared, then there can be a seamless transfer of ownership.

Insurance for the Future

The title search should raise any concerns about ownership, but it’s possible that something falls through the cracks. Title insurance offers protection against title defects that emerge down the line. A title insurance company will guide the process and offer expert insight, ensuring that the policy is legally sound.

Supervise the Closing and Escrow Process

In addition to supervising the closing, a title insurance company can manage the escrow account for the sale of the home.

Settle Future Claims

If the insurance policy is activated due to a discrepancy or title cloud over your property, then the title insurance company will provide legal representation. They will investigate any unexpected claims and assist in settling the issue.

The many benefits of title insurance include reduced risk in the event of a title defect, forgery, or fraud. An experienced attorney is not only familiar with the common title insurance terms and definitions, but also state requirements and specifics.

Common Misconceptions About Title Insurance

For an investment as significant as purchasing a home, title insurance is not something you want to sacrifice. Yet many people do because they have misunderstood how title insurance works. Firstly, it is crucial to understand that title insurance, unlike other insurance premiums, is a one-time payment rather than a recurring monthly expense. As the buyer, you will only pay for title insurance once (when you purchase the home), and it will insure you for as long as you (or your heirs) remain the owner of your home.

Secondly, many people tend to think that title insurance is prohibitively expensive when it is very affordable. As any person who works in the real estate sector will tell you, if you can afford to buy a home, you can afford to buy title insurance. The cost of title insurance is calculated depending on the value of the property and the extent of coverage you choose to purchase.

Florida Title Insurance Fees

Aside from title insurance attorney fees, you will pay a one-time premium amount for your title policy. The premiums to be charged are set forth by the Florida State Insurance Department, as with all insurance. This set rate is known as “promulgated rate”. Keep in mind that if you are purchasing an owner’s policy, it does not expire until the property is sold to someone else. This means that the owners’ policy will remain in effect until the house is sold. The amount due is dependent on the type of policy in place.

If you’re in the process of buying your first home, you’re probably learning just how many unexpected costs and fees real estate transactions involve. From attorneys’ bills to loan origination fees, appraisal fees, and more, the costs of closing a real estate transaction can quickly run into thousands of dollars. While purchasing title insurance may be optional in Florida, it is the last thing you should be compromising on. To learn more about the best time to purchase your policy, read our guide on when is the best time to purchase title insurance.

For answers to common questions about title insurance in Florida, visit our Florida title insurance FAQs.

Florida Home Title Company

Finding a reliable company that provides the right title services is a lot easier than most would expect. Florida Home Title Company has a proven track record of excellent client service and meticulous attention to detail. Owned and operated by Attorney Gary I. Handin since 1993, the team at the Florida Home Title Company is qualified to assist you with everything from conducting thorough title searches, advising you on the coverage available, preparing policy documents, and acting as your closing agent.

Navigating the legal and financial complexities of purchasing your first home can be daunting. Taking out comprehensive title insurance is the best way to give yourself peace of mind that your precious investment will be protected. All you need to do is enlist the services of The Law Offices of Gary I. Handin, P.A. The best part is that we also own the Florida Home Title Company, which can handle all your title insurance needs, whether buying, selling or refinancing a property.

Give us a call at 954-796-9600 and we’d be happy to assist you with any queries you have about obtaining title insurance for your real estate transaction.