IF YOU DON’T THINK YOU NEED TITLE INSURANCE, YOU PROBABLY DON’T KNOW WHAT IT IS
Recently, a customer and his realtor mentioned to me that title insurance “now” no longer mandatory and that as a result, the buyer would not be purchasing coverage. I explained to them that it was never mandatory (more on that below) and after explaining why I thought they were making a mistake (and having him sign an acknowledgment to that effect), I ofcourse acquiesced and the transaction went forward without coverage. I hope for his sake he never needs it.
As I thought about it, puzzled by why someone would take the incredible risk he was taking, it occurred to me that he had made up his mind before we ever spoke and that ultimately he didn’t know what he didn’t know and at least in this case, didn’t want to reconsider.
Title insurance is at first hard to understand. It sort of works backward from regular insurance. You usually buy insurance to cover things that may happen in the future (flood, fire, hurricane etc.). While what follows is a bit of an oversimplification, title insurance is purchased to cover things that happened in the past. The land that the property you bought sits on has been there for a long time (like before man walked the earth). In that time, many people have owned it, sold it, bought it, improved it, demolished structures on it, used it, mined it and done countless other things that we humans do with our land. During that time, restrictions may have been placed on that land (like being limited to what can be built on it for example), or promises made to other people giving them rights to that land (easements for example). During that time documents were signed conveying the land or parts of it from one owner or lender to the next. All of these things that have transpired with respect to the land should have been done by way of a formal document that had to be executed in a certain way and properly recorded. One mistake, one defect, one restriction you didn’t think of, one mortgage that never got satisfied and you are entire interest and investment is at risk.
When you hire a title company, they review the title to try to ascertain that the flow of that property (the “chain of title” ) is such that you are getting “good and marketable” title subject to restrictions that won’t impair the reason you are purchasing the land or your intended use. They are insuring that you are getting what you are supposed to be getting and that mistakes or fraud don’t interfere with that or at least that if they do, your investment is insured.
Without title insurance, you would be on your own and the legal fees in trying to clear up a defect can be substantial let alone the risk associated with losing. Considering title insurance is a one-time purchase and usually costs a fraction of a percent of the purchase price, it seems clear that the only reason not to buy it is because you don’t really understand what it’s for.
One other thing. Title insurance has never been mandatory. If you are a cash purchaser and don’t want title insurance, you don’t have to buy it. If you have a lender, they will almost certainly require you to buy it for all the reasons (and more) that I described above. Nothing has changed except that the way title insurance is required to be disclosed in a loan transaction but that is a subject for another day.
Foreclosure Fantasies Die at the Hands of the Florida Supreme Court
I never really did much “foreclosure-defense” litigation. While I did take some matters where there were novel questions of law or meritorious defenses, I never thought being paid just to delay was particularly ethical nor was it good for the system, our reputation as lawyers or even the client. Still, as real estate litigator in South Florida, you can imagine that it has been the most frequently brought up topic at cocktail parties and other places where I’d rather not talk “shop.”
Invariably, it would begin with someone explaining to me why they (or their “friend”) is entitled to a free house and end with a lengthy (largely Google informed) lecture on the statute of limitations. I tried to avoid getting into the merits of the matter preferring to sip quietly at my scotch until I could slip away. Still, I can understand why this defense has been so appealing. First, it appears to be a fairly straightforward defense. That is, the lender didn’t bring its action in time, and therefore the borrower should get a free house. Second, the idea of a free-house is like a lottery ticket and who doesn’t like to talk about that? Well, while that may be true, the statute of limitations argument(s) had a variety of technical legal problems but try telling that to the borrower who thinks they are getting a free house. Alas, that is exactly what the Florida Supreme Court has now done in Bartram v. U.S. Bank National Association, etc., et. al.
In summary, the Court has recognized that, for purposes of foreclosure, every payment not made is a “separate and distinct default” meaning that even if you stopped paying five years ago and managed to avoid a lawsuit for that long, it doesn’t mean that you are in the clear.
Indeed, the Court has found due to the “unique nature of the mortgage obligations” (which I don’t really get but whatever), each and every payment missed triggers a new limitations period. On a thirty year mortgage, that could add up to a lot of flexibility for the lender.
So what about the acceleration notice?
Many have taken the position that the statute of limitations counts from the date of the acceleration notice. Not so fast said the Court finding that the statute of limitations as to the acceleration notice might apply as to those periods of default but not as to new defaults (missed payments).
Do You Have A Right To A Lien For Your Real Estate Commissions?
Agents often ask whether they can impose a lien upon real property for the payment of their commissions. The answer to that question, as is the case with many answers involving the law, it depends. First, to the extent that the commission claim is related to residential property, a licensee does not have a right to impose a lien upon that property unless such a right is expressly stated in the contract upon which the lien claim is predicated. That means that if you use the standard form listing agreements, you likely have no right to impose a claim of lien for your commission if a dispute arises.
In the commercial context, there is a statute that expressly permits the imposition of a lien to secure the payment of commissions. Still, in the recent decision, Wells Capital Investments, LLC v. Exit 1 Stop Realty, (2014 WL 4476478 September 12, 2014) the Court held that where an agent discontinues marketing efforts and communication with the seller, it may be deemed to have abandoned the commission agreement, and, as a result, not be entitled to its commission. The Court further references that “once a contract is abandoned, a seller is free to sell its property to anyone, ‘including the purchaser first found by the broker,’ either by means of negotiations with the purchaser or through the medium of another broker.’”
The above is based upon the obligations under a listing agreement and was differentiated from the Court’s analysis in the seminal case on the “procuring cause” doctrine, Rotemi Realty, Inc. v Act Realty Co., 911 So. 2d 1181, (Fla. 2005).
Its important that agents make sure in residential transactions that if they want to have the right to impose a lien for non payment of commissions that they state as much in their listing agreement(s). In commercial transactions, while it’s not necessary, it is still advisable and in both cases, an entitlement to a commission requires continued effort, involvement and presumably, communication.
If you are a licensee expecting a commission, the most important thing you can do is remain in touch, engaged in the transaction and involved with the parties. Documenting your efforts and involvement can be critical in determining whether you are entitled to be paid or not. Even when dealing with rentals where you are expecting renewal commissions, you’ll want to make sure that you are contractually entitled to them and that you remain in contact.
Seller Financing and Private Money Financing Isn’t What It Used To Be After Dodd-Frank.
Real Estate Professionals and Lenders Beware !!!
After causing the meltdown of the residential housing market,
Congress has decided only the large institutions should loan on residential housing.
Lately, after years of (rightfully) avoiding it like the plague, some of our Florida private lender clients and Florida real estate sellers have expressed an interest in dipping their toe in the Florida residential lending pool again (either by extending third-party mortgage or seller financing of Florida homes and condos). We have been strongly discouraging this course as the regulatory burdens have simply made the practice too dangerous.
In response to the unfair practices (supposedly) of the large institutional lenders and their contribution to the housing-market collapse, in Florida in particular, Congress passed The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). On January 10, 2014, Dodd-Frank went fully into effect and its sweeping breadth has all but eliminated the possibility, if not the practicality, of small lender/private financing. Additionally, Dodd-Frank disallows owner/builders from offering financing on their own altogether. Beyond that though, its sweeping regulation affects private sellers, private lenders and small (non-institutional) lenders in Florida and around the country.
How do you know if Dodd-Frank applies to your financing?
At its core, this section of Dodd-Frank is targeted toward residential home financing. Excluded from the new regulations are:
- Florida Commercial Properties
- Florida Vacant Land
- Florida Multi-Family Properties of five (5) units or more
THE ACT DOES NOT APPLY TO FLORIDA REAL ESTATE WHERE THE OWNER DOES NOT INTEND TO MOVE INTO THE PROPERTY AND OCCUPY IT AS OWNER-OCCUPIED REAL PROPERTY. IF THIS IS WHAT YOU ARE RELYING ON, MAKE SURE YOU GET A CERTIFICATION OF IT IN WRITING.
Who is excluded from the Act?
There are basically two (2) exclusions from Dodd-Frank that would impact Florida sellers of real estate and Florida private lenders and the need to have a Mortgage Loan Originator license. The two exclusions are referred to as the “one-property exclusion” and the “three-property exclusion”:
– One-Property Exclusion – If the lender financing (including seller financing) has financed more than one owner occupied dwelling in the last twelve (12) months they are subject to the following restrictions:
- Promissory Notes must be fixed for the first five (5) years and then may adjust by no more than two (2) points per year with a cap of 6 points off the face rate of the note;
- No Negative Amortization (but balloons may still be permitted)
- Lender must evaluate the Borrowers’ ability to repay the loan (criteria set forth in Reg. Z and in the Comments;
– Three-Property Exclusion – If the lender financing (including seller financing has financed more than three-owner occupied dwellings in the last twelve (12) months, they are subject to the above restrictions, and:
- They must have a Mortgage Loan Originator License and/or operate through someone who does to complete all transactions.
Note for Florida Realtors and the standard forms for real estate
Transactions commonly used in Florida.
We represent a large number of realtors from Miami Beach and throughout Dade, Broward and Palm Beach Counties. We like to make sure that the realtors we work with are kept current on changes in the law to stay out of trouble. In its present form, Comprehensive Rider C “Seller Financing” (rev. 8/13) of the FAR/BAT may not comply with Dodd Frank. If your Seller is financing all or part of the transaction and use this version of the FAR/BAR, we would advise (at least until the in-process revision comes out,) that you advise your buyers or sellers that they’ll need to seek the advice of counsel before providing seller financing. Make sure you communicate to the parties in writing to avoid any potential exposure for you or your broker.
In all, Dodd- Frank is complicated and the above is intended to be a generalized summary and isn’t intended to replace or provide the advice of counsel.
Eric A. Jacobs is the Chief Operating Officer of Clear Title Group, LLC, one of Florida’s largest title insurance agencies and the choice of most high-net-worth buyers and sellers in South Florida. He is also a partner with the law firm of Beloff | Parker | Jacobs, a boutique South Florida law firm that provides sophisticated legal representation with regard to real estate transactions and dispute resolution. He can be reached at firstname.lastname@example.org.