Owning a piece of real estate is an expensive prospect. Knowing what you own and that no one else has a claim to your ownership is very important.
Whether an encumbrance or defect, most real estate has some type of issue affecting its title.
There are a whole host of issues that could potentially put your ownership rights in jeopardy.
Do you have a clear title for your house? Are you sure? Did the contractor you hired to build that new addition place a lien on your property?
Did you inherit the property? Or, did you take possession of the family home after a divorce? Was it deeded to you properly? Have you missed HOA due payments? Do you have any municipal fines or assessments?
Are you a real estate broker, investor, or mortgage broker, looking for consistent dependable real estate title and closing services at competitive rates? Contact us and find out how we can help you. (407) 259-2426 or Schedule a Consultation
The real estate attorneys at Walsh Banks Law provide comprehensive real estate title services for both residential and commercial real property. We perform title searches and examinations, investigate and resolve encumbrances and defects to title of the property at issue, assist with title insurance; as-well-as, perform quiet title actions and assist in the closing process.
When most people think of a real estate title, they think of something similar to a car title. An official document declaring that you own the car. Sounds simple, right? But, it really isn’t that simple.
In most states, including Florida, when you own real estate you do not get a physical document declaring your ownership rights. It might surprise you to learn that, you cannot go down to the county comptroller’s office and order a certificate of title for a piece of property you own. In the system Florida uses to track land ownership, there is no actual title or certificate of title used to prove ownership of real property.
But, what if I have a deed? Doesn’t that prove I own the property? Nope. A deed is simply evidence of the transfer of ownership interest, not proof of ownership. Then how is ownership of a piece of real estate proven?
Florida tracks evidence of real estate ownership through what is called the “abstract title system”. All documents related to transactions affecting a particular property; deeds, mortgages, liens, etc. are publicly recorded. This way information is freely available to anyone considering some type of transaction involving the property. As a body, those documents are called “evidence of ownership” and are summarized into a document called an “abstract of title” or “title abstract”. A qualified real estate attorney must then review the abstract and create a report called an “Opinion of Title.”
The Opinion of Title report is the closest thing you will get to a “real estate title” in Florida. The report uses information in the title abstract to outline/describe current ownership rights. It also outlines and steps necessary, if any, to enable the transfer of those ownership rights – remove encumbrances and defects to make ownership of the property in question transferable, aka a marketable title.
It may seem like a convoluted system. But, the system was designed to protect prospective buyers and lenders from, fraud, secret encumbrances, sales, transfers etc.
Both parties to a real estate transaction benefit from an extensive title search. However, they are primarily designed to protect buyers and prevent future litigation.
The public records that are typically searched include tax documents, liens, judgments, divorce records, probate records, land records, court judgments, and utility bills. A more thorough title search could also include a review of documents pertaining to surveys, property location, zoning, and improvements that were made on the subject property.
During a Title Search several key issues are reviewed:
There are two specific categories of title problems that could delay or even potentially derail a real estate transaction; encumbrances and defects.
A title encumbrance is anything that restricts the use or transfer of the property. Most encumbrances discovered during a title search can be easily and quickly corrected. For the most part, they are related to financial liens and can be cleared at the actual property closing. Some encumbrances, on the other hand, are not so easily resolved, or significantly reduce the value of the property being purchased. For example, the seller’s grandmother may have transferred the property’s mineral rights to an oil company 20 years ago while keeping the family home. It’s important for sellers to understand their ownership interests and for buyers to understand exactly what interest they’re purchasing. If a seller already sold mineral rights, a buyer may only purchase the remaining interest
The following are examples of legal issues that would be considered real estate title encumbrances:
A title defect is a legal issue, claim or circumstance that makes it difficult to identify the true owner of the property. Title defects are one of the primary reasons closings are delayed. Unlike encumbrances, title defects must be cleared prior to closing on the property.
Clerical errors, such as expired notary stamps or improperly executed powers of attorney, are often easily cured. The solution may be as simple as amending a deed, executing a power of attorney, or correcting a clerical error. Title defects involving boundary disputes, or unknown easements may result in renegotiation of the purchase price. Clouded title arising from fraud, duress, and ownership disputes, however, can be fatal to the transaction. Only a real estate attorney can advise parties as to the impact of the defect and offer advice on the best course of action to clear a defect.
A real estate title is considered defective for any number of reasons including:
Defects revealed post-closing often blindside buyers. A title insurance policy comes into play when the ownership rights of a property owner are called into question. Its main purpose is to prevent losses and to decrease (or eliminate) risks that occur when title defects arise out of past events.
When it comes to title insurance, there are two primary types. The first type, called owner’s title insurance, is in place to protect the property purchaser from any issues related to the title for the property. The second type of title insurance – or lender’s title insurance – protects the lender (i.e., the mortgage company) from defects in title that may arise later on down the road. When a home buyer closes on a home, he or she will pay for the title insurance for the lender at the time of closing.
Although a buyer is not required, by law, to purchase title insurance for themselves it is still highly recommended. If a previously unknown title issue is discovered in the future, and if only a lender’s title policy was purchased then only the lender is covered.
But, if it turns out that title to the subject property was incorrect and someone else is the rightful homeowner, if you have your own title insurance in place, it will likely cover your stake in the property.
In addition to ensuring against the potential title defects and encumbrances listed above, title insurance can also be used to safeguard against fraud, forgery, or a prior property owner’s lack of capacity to enter into the real estate transaction. Just like with any other type of insurance contract, a contract for title insurance may include various conditions and exclusions that work to deny or eliminate coverage under a given set of circumstances.