Larry Tolchinsky – Title Insurance Attorney Since 1994
Below is a detailed primer on title insurance in Florida. You will find below answers to common questions about Florida title insurance, including:
- What is Title Insurance?
- Why Do You Need Title Insurance
- How Does Title Insurance Work?
- Reasons To Use A Title Insurance Attorney
- Types of Title Insurance
- Title Insurance Endorsements
- What Does Title Insurance Protect?
- What protections are NOT included in a standard title insurance policy?
- Title Insurance Rates (including re-issue rates)
Title Insurance protects owners and lenders against defects in the ownership of real property. “Title” is the collective ownership records of a piece of real estate; it consists of all transfers of real property rights, as well all loans that use the property as collateral. “Title” also means having the right to control and convey a piece of real property.
Florida Statute 624.608 defines title insurance, in part, as “Insurance of owners of real property or others having an interest in real property or contractual interest derived therefrom, or liens or encumbrances on real property, against loss by encumbrance, or defective titles, or invalidity, or adverse claim to title.”
If real estate has “clear title” (e.g. there are no known liens or encumbrances that will materially affect ownership and control of the property), it is free from ownership claims from outside parties and/ or unpaid debts of previous owners. The purpose of a “title insurance policy” is to protect an owner, or mortgage lender, against losses arising from problems with title to the property that were unknown to you when you purchased or financed it (a title insurance policy is a prerequisite to obtaining a mortgage loan from an institutional lender to purchase real estate in Florida).
When you buy real estate in Florida, you of course want to know that the person from whom you are purchasing the property actually owns it (e.g. holds marketable title to the property). You want to make sure that there aren’t other entities and/ or individuals, such as governmental bodies, contractors, lenders, judgment creditors or the Internal Revenue Service, with claims to the property/ improvements located on it. These “liens” are not extinguished when the property is transferred to you, even if you (or the Seller) are not aware of them. They remain with the land until they are satisfied and, as such, may restrict your use and enjoyment of the property and even cause you to lose ownership of your property.
A title insurance policy is an insurance policy that protects you from any of these adverse claims or conditions.
Before issuing a title insurance policy, your title insurance agent will perform a title search of the public records to reveal any defects in the title and to identify all recorded encumbrances on the title to the property, such as unpaid property taxes, unsatisfied mortgages, judgments and tax liens against current or past owners, easements, encroachments, restrictions and court actions.
Any defects in title are reported to you and your lender prior to your purchase of the property in the title insurance commitment. If there is a problem, a buyer should immediately direct the Seller to correct the defects (see your real estate contract) and terminate the contract if he/she fails to do so, or, alternatively, accept the contract subject to whatever defects are listed in the title commitment (which is not advisable to do).
If you take the property subject to its defects, you assume full responsibility for the fulfillment of all such claims as are known to you if the Seller defaults on them; your title insurance policy will not indemnify any losses resulting from these known liens.
But, as to any recorded claims of ownership about which you and the Seller are unaware, and which exist but were not discovered by your title insurance agent prior to the issuance of your policy, you are protected. In this case, the title insurance underwriter will defend in court against such claims; if it loses, it will compensate you for loss or damage up to the amount for which you have policy coverage.
Read: What Is Included In A Broward County Title Search?
Title Insurance – The Basics:
When you are refinancing, or after you negotiate a contract for the purchase of real property, one of your next steps is to find a closing/title agent who will issue title insurance for your property. The purpose of title insurance is to eliminate risks of claims against the title to your property or the property that is being transferred to you. Because a standard title insurance policy serves only to protect against some potential losses and damages caused by problems relating to the ownership of the property, you should have and a lender will require you to secure additional coverage. Your title insurance agent will provide such coverage by issuing endorsements to your title insurance policy.
It is important to be careful as to whom you choose as your closing/title agent to issue your title insurance policy. You should solicit the services of an experienced real estate/title insurance attorney in this regard. There are many reasons to use a title insurance attorney, including the fiduciary duty owed to you to make known any discounts/credits to which you may be entitled; a title company might take advantage of your lack of knowledge of these discounts.
Also, it is advantageous, in terms of time and expense, to have an attorney on your side in the event a legal issue arises when title is examined or if an issue arises at the closing of your transaction. And finally, title insurance attorneys understand and are familiar with local, tax and probate laws, providing the attorneys with the expertise necessary to advise their clients of the quality of title and to make a determination of what to include in a title insurance policy.
There are two types of title insurance in Florida: the lender’s and the owner’s policies. The lender’s policy protects the bank or mortgage company that lent you the money to purchase the home and the owners’ title insurance protects the homeowner from any of the issues mentioned above. Your closing agent will issue both policies once the transaction is closed.
An owner’s policy will cover up to the full amount you paid for the property and the mortgagee’s policy covers up to the full amount of the mortgage (sometimes more).
Which Endorsements to Policy Coverage Do Lenders Commonly Require?
A standard title insurance policy does not cover everything – many things are left unprotected. So, if you apply for a loan to finance your purchase of property, your lender/ mortgagee will want more protection so it will require that you obtain endorsements to your standard title insurance policy.
The endorsements that Florida lenders most commonly require property owners to purchase are listed below (Note: the language of most endorsements are sometimes, but rarely, revised, so some of the protections mentioned below may be altered, modified or deleted):
- Restrictions, Easements, Minerals: Unimproved Land (Florida Endorsement Form 9.1): It protects unimproved land (i.e. land which has not been developed) against loss or damage sustained as a result of: (a) Present violations on the land of any enforceable covenants, conditions or restrictions; (b) notices of violation of covenants, conditions or restrictions on the land which, in addition, (i) establishes an easement on the land; (ii) provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant; or (iii) provides a right of reentry, possibility of reverter or right of forfeiture because of violations on the land of any enforceable covenants, conditions or restrictions; (c) Any encroachment onto the land of existing improvements located on adjoining land; or (d) Any notices of violation of covenants, conditions and restrictions relating to environmental protection recorded or filed in the public records. Under this endorsement, there is also some protection for damage to buildings constructed on the land after the policy date for the use of the surface of the land.
- Restrictions, Easements, Minerals: Improved Land (Florida Endorsement Form 9.2): It protects improved land as Form 9.1 protects unimproved land, but, also, it insures against loss resulting from damages to building on the land related to easements and other issues, including, but not limited to, a court order denying the right to maintain an existing building on the land because of any violation of a recorded restriction, covenant, or other related item, including those in a recorded plat for a subdivision or a court order requiring the removal from any land adjoining the land of any encroachment.
- Environmental Protection Lien Endorsement (Florida Endorsement Form 8.1): When a loan is secured by a mortgage on property that is used primarily for residential purposes, this endorsement provides the insured lender with protection against loss or damage sustained by reason of loss of priority of the lien of the insured mortgage over environmental protection liens recorded in the public records or created pursuant to a state statute.
- Variable Rate Mortgage Endorsement: It affords the insured lender protection against loss or damage sustained by reason of invalidity, loss of priority or unenforceability of the lien of the insured mortgage due to changes in the rate of interest (variable rate, convertible, renegotiable rate, adjustable rate or shared appreciation mortgages).
- Condominium Endorsement: It insures that the condominium estate has been created in accordance with local laws, and, further, that there are no charges or assessments which are due and unpaid as of the policy date. This endorsement also protects against loss sustained due to (a) present violations of enforceable covenants, conditions and restrictions; (b) an obligation to remove any improvements to the property which are in existence on the policy date, because of present – or certain, unintentional future – encroachments on other units; and (c) failure of title by reason of a right of first refusal to purchase the unit which was or could have been exercised on the policy date.
- Planned Unit Development (PUD) Endorsement: It protects planned unit developments as the Condo Endorsement protects condominium units (see above).
What Protections are Included in/ Excluded from Title Insurance Policies?
A title insurance policy is a one-owner item; its coverage extends only to the insured party listed on the policy (the owner and the mortgage company) and to those who succeed to the interest of the insured by operation of law (e.g. personal representatives, fiduciaries and heirs).
A title insurance policy is NOT assignable to another purchaser. You should note, however, that policy coverage is perpetual as to the insured. So, if, ten years after you sell your property, it is found that you breached your contract with your Buyer because you conveyed defective title to the property (e.g. there was a forged deed in your chain of title), your insurer will be obligated to defend/ reimburse you as necessary – assuming, of course, that your policy provides sufficient coverage for the defect.
How will a standard title insurance policy protect you?
A standard title insurance policy is likely to protect against only SOME common risks that can threaten your use and enjoyment of real property. Be very careful to review the terms of your policy (or hire a title insurance attorney to do so) to ensure that you are adequately protected. But generally, your owner’s title insurance policy will require your insurer to defend your title in court and pay for actual loss up to the policy maximum under the following circumstances:
- A lien is filed against your title because a previous owner failed to pay a mortgage, taxes, judgment, special assessment or homeowners/ condominium association fee;
- There are leases, contracts or options on your land that weren’t recorded in the public records or disclosed to you;
- You lack a right of access to and from your property;
- A deed in your chain of title is invalid because somewhere along the way, a notary public or other official improperly signed, recorded or delivered a deed; and
- A deed or other document in your chain of title is invalid as a result of forgery, fraud against the rightful owner, a signature given under force or a signature given by a person legally incompetent to sign or claiming to be someone else.
Absent endorsements to the contrary, a standard title insurance policy will NOT protect you against title defects – unrecorded or recorded, and regardless of when sustained – about which you knew or which you allowed to occur. Also, it will NOT cover problems with your title that occur after the date on which you purchase the policy. Further, your title insurance policy will NOT protect you from UNRECORDED claims against the title to your property. Your insurer is also NOT likely to protect you against loss or damage suffered by reason of:
- Violations of building and zoning ordinances and other laws and regulations related to land use, land improvements, land division and environmental protections;
- Any restrictive covenants that limit how you may use your property and/ or state how buildings are to be constructed on it; these are contained in the policy itself;
- Losses resulting from rights claimed by renters or others occupying the land;
- Condemned land, unless a condemnation notice appeared in the public record on the policy date, or the condemnation occurred before the policy date;
- Your spouse’s homestead, community property or survivorship rights to the property;
- Whatever title irregularities arise from a deceased person’s estate, a bankruptcy estate or a trust;
- Claims of others who may have certain rights if your property is near a body of water, or if it has a river or stream flowing through it (there is an endorsement related to this issue); or
- Taxes for the year of the effective date of the policy, as well as subsequent taxes and assessments by taxing authorities for prior years due to change in land usage or ownership (i.e. where tax exemptions claimed by previous owners result in more taxes being assessed against your property in the future).
Which Laws/ Rules Govern Title Insurance in Florida?
In Florida, the title insurance industry is regulated largely under Title XXXVII of the Florida Statutes. Chapters 624 and 626 defines title insurance and provides general requirements for the authorization of title insurance underwriters/ agents and administrative oversight of the industry, which responsibility falls to the “Office of Insurance Regulation”. Chapter 627 contemplates the minimum rate a title insurance company must charge and the minimum protection it must offer when issuing a title insurance policy; among other things, it prohibits an insurer from writing certain exceptions/ exclusions to coverage into any given policy.
In the Florida Administrative Code, the Office of Insurance Regulation sets specific guidelines for the various steps in the process of issuing a title insurance policy. For example, Chapter 690-186 discloses the standard according to which your title insurance premium is to be calculated.
What are the Current Title Insurance Issue and Re-Issue Rates? When am I entitled to a Discount?
The Office of Insurance Regulation sets rates for title insurance premiums, called the “promulgated rate”; title insurance agents charge at least the minimum promulgated rate when issuing title insurance policies. To determine the promulgated rate, the Office takes into account underlying risks and, further, the various costs associated with underwriters’ issuance of title insurance policies (i.e. administrative surcharges, annual licensing fees and taxes paid to the state on the gross amount of premiums sold). The “regular title insurance premium” that is charged to you consists of the promulgated rate, as well as charges for related title services (e.g. preparing title information and other documents and conducting the closing for the real estate transaction, in which the title insurance binder, commitment or policy is issued).
The Office has required that your title insurance agent break the regular title insurance premium down into its constituent parts (promulgated rate, title search charges, examination fees and closing charges) on your disclosure documents. The Office hopes that you will thus be better informed as to the cost of title insurance, and, further, that it will be better able to monitor practices within the industry to ensure that title insurance agents and underwriters are not compromising the promulgated rate.
In Florida, your promulgated rate is calculated primarily in accordance with your property’s insurable value. If you obtain a title insurance policy pursuant to your purchase of property, the rate is determined by the purchase price of the property. If, however, a title insurance policy was recently taken out on your property – or if you obtain the policy pursuant to a mortgage refinance, which refers to the process of replacing your existing debt obligation with another bearing different terms – you may be entitled to a discounted “reissue rate”.
(Remember, however, that a non-lawyer title insurance agent is not obligated to acknowledge your qualification for this reissue rate/ credit, while a title insurance attorney will owe you a fiduciary duty to fully disclose this and other such benefits.)
When does a homebuyer qualify for a re-issue credit?
Simply stated, a homebuyer will qualify for a reissue credit if he/she is obtaining a title insurance policy for property for which a title insurance policy was only recently purchased and which has not since been improved (i.e. undergone construction, etc.).
To be more specific, however, the following criteria must be met to qualify for a reissue credit:
FIRST, an owner’s title insurance policy for the property must have been issued previously to insure either the seller or the borrower in the current transaction; and
SECOND, the property must not have been improved since the original policy date, except for roads, bridges, drainage facilities or utilities; or, the original policy date must be less than three years prior to the reissue date; or, the new policy must be a mortgagee’s policy issued upon the refinancing of property for which the current mortgagor had previously obtained an owner’s policy.
Florida Title Insurance Premium Calculator
To calculate the promulgated rate for your owner’s title insurance premium, which is the absolute minimum that your title insurance underwriter can charge you if you do not qualify for a reissue credit as noted above, use the following table:
|Purchase Price||Title Insurance Cost Per Thousand $|
|$0 – $100,000||$5.75|
|$100,000 – $1 million, add||$5.00|
|$1 million – $5 million, add||$2.50|
|$5 million – $10 million, add||$2.25|
|Over $10 million, add||$2.00|
To calculate the promulgated rate for the reissuance of an owner’s title insurance policy, which is the absolute minimum that your title insurance underwriter can charge you if you qualify for a reissue credit as noted above, use the following table:
|Purchase Price||Title Insurance Cost Per Thousand $|
|$0 – $100,000||$3.30|
|$100,000 – $1 million, add||$3.00|
|$1 million – $10 million, add||$2.00|
|Over $10 million, add||$1.50|
Hypothetical: Say you have contracted to purchase a home for $110,000.00. To calculate the promulgated rate for your property’s basic title insurance premium, you would use the first table listed above and engage in the following two steps: (1) Multiply $5.75 by 100 to arrive at the rate to be charged for the first $100,000.00 of your property’s value, for a total of $575.00. (2) Multiply $5.00 by 10 to arrive at the rate to be charged for the remaining $10,000.00 of your property’s value, for a total of $50.00. Add both values to determine the promulgated rate for your property’s basic title insurance premium, which comes to $625.00. Note: If you are obtaining title insurance pursuant to, for example, an attempt to refinance a mortgage on your property, and you meet the remaining requirements for a reissue credit, you would use the second table listed above, and engage in the aforementioned two steps to arrive at the promulgated rate for your property’s “reissue” title insurance premium.
Remember, however, that the promulgated rate is generally the rate your title insurance underwriter will charge you to insure the title to your property. The promulgated rate is only ONE component of the regular title insurance premium you will pay for your title insurance policy. Which additional fees will apply will depend on the underwriter and title agent you select.
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