Title Insurance: It's important. By Lawrence E. Crary III, Esq

Title Insurance: By Lawrence E. Crary III

Anyone who buys real estate in Florida should have title insurance. An Owner’s Policy of Title Insurance assures you that you have good title to the property you are buying. Without it, you are running the risk that your property will have title problems, especially when are ready to sell the property. Title insurance coverage begins with a thorough search of the title records for the property you are buying. This search will detect title problems such as liens on the property, restrictions on use of the property and defective deeds from prior owners. If you also obtain a survey for your new property (which is recommended for all property types except condominium units), your title insurance coverage will also protect you against boundary disputes such as fence incursions and driveway encroachments. The title search results in the issuance of a Title Insurance Commitment by a title company which verifies the name of the current owner, establishes requirements for you to obtain clear title and discloses the exceptions to your coverage such as subdivision covenants and restrictions. The seller will be required to meet the title insurance requirements to give you clear title to the property. The exceptions will list all of the restrictions on the property (other than zoning) so that you will know ahead of time what you can and cannot do on that property.

For the protection provided, title insurance is not expensive. You can obtain title insurance coverage through your attorney or a title company. Often, if your attorney provides the title insurance, your attorney’s fees may be significantly reduced. For a $400,000 home, the title insurance is $2,075 and for a $600,000 home it is $3,075. The premium is scaled to the price of the home. This is a one-time premium paid at the closing of your purchase. Enhanced title insurance coverage is also available which covers the appreciation of your property over the years, which can be considerable in Florida. For a $400,000 home, enhanced coverage only costs an additional $320 and for a $600,000 home an additional $480. These are also one-time charges.

Title insurance and title review are always subjects in a contract for the purchase and sale of real estate in Florida. Your contract with your seller will specify the type of title search, title review and title insurance applicable to the property you are purchasing and which party is responsible to pay for the title search and title insurance. There is a standard contract for the purchase and sale of residential property in Florida know as the FAR/BAR Contract, which is a form developed by the Florida Association of Realtors and the Florida Bar. The FAR/BAR Contract has boxes to check to designate who is to pay the title insurance costs. Apart from the real estate commission paid to a broker (which is normally paid by the seller of the property), the two major expenses in a real estate sale and purchase are the Florida Documentary Stamp Tax (which is $7.00 per $1,000 of the purchase price) and the title insurance costs. Often, the seller pays the doc stamp tax and the buyer pays the title insurance charges. There is no required allocation of these expenses, it is a matter of negotiation between the buyer and seller, but this is the normal split of these costs.

Title insurance provides you with coverage as long as you own the property and it can also facilitate the sale of your property as a title base for your purchaser’s title insurance. If a title problem arises during your ownership, the title insurance company will defend your title and cure the problem. If the problem is not curable (which is very rare), the title insurance company will pay you the amount of the coverage. Your Owners’ Policy of Title Insurance will be backed by a large title insurance company with significant assets.

Having your attorney issue the title insurance is an advantage to you because your attorney can explain the title insurance and offer you legal advice regarding the status of title, the requirements for you to obtain clear title, the exceptions to coverage and the restrictions on the property. For example, when an easement is listed as an exception to coverage, your attorney can determine if this is a matter to which you should object and require the seller to eliminate the easement prior to closing. A title insurance commitment provides you and your attorney with the status of tile. The contract for your property purchase gives you the right to object to title matters which affect what is know as “marketable title”. Your seller is required to provide you with marketable title. If any of the matters disclosed in the Title Insurance Commitment make the title to the property unmarketable, you have the right to object to that and require the seller to cure the title problem. Your attorney will take the initiative in making the objection and requiring the seller to cure the problem.

Your attorney will also review the covenants and restrictions on the property you are buying. These will be shown in the exceptions in your Title Insurance Commitment. Without this title search, you would not know the exact covenants and restrictions which apply to the property you are buying.  It is very important for you to understand all of the covenants and restrictions which apply to your property. Covenants and restrictions include:

• The minimum and maximum size of home on your property.
•  Architectural review committee approvals for your new home or renovations of the home on the property.
• Setbacks from property boundary lines.
•  Paint colors on your home.
• The amount of Property Owners’ Association assessments on your lot or home and the process to determine them.
• Your rights as a member of the Property Owners’ Association.

 Even if a title company or the seller’s attorney is issuing the title insurance in your purchase, you should engage an attorney who specializes in real estate transactions to represent you. Your attorney will review the Title Insurance Commitment, review it with you, make title objections as necessary, monitor title cures, and review the closing documents to assure that they are correct and meet all requirements of the Title Insurance Commitment.

Title insurance is important. Please don’t neglect to obtain it. Please don’t ignore it. Title insurance protects your investment in your property from the day of your purchase to the day you sell it.