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Title Insurance Overview Header

A title is the foundation of property ownership. Anyone who purchases real property also obtains a title to the land. In Florida, most titles can be traced back to the original Spanish land grants by compiling all of the legal documents (or instruments) dating back to the earliest public records. The title is the buyer’s legal right to possess the property and use it within the restrictions imposed by zoning codes or other established limitations.

The buyer always has an option to select their own closing and/or title agent. However, a lender who enters into a sales contract with buyers may encourage the use of one title agent to act as the closing agent as a cost savings measure. If the buyer selects their own title agent to act as the closing/title agent, the lender usually doesn’t pay the buyer’s portion of closing fees. A review of the buyers contract should reveal this stipulation.

Like other documents, you shouldn’t sign a HUD-1 settlement statement unless you understand and agree to all the terms. Once it’s signed it becomes a legal document and it could involve a lengthy court battle if want changes made.

REGULATION

The title industry is a multifaceted arena and is regulated by several different agencies or organizations. The Real Estate Settlement Procedures Act (RESPA) is a federally mandated consumer protection statute designed to help homebuyers be better shoppers in the home buying process. RESPA is now administered and enforced by the Consumer Financial Protection Bureau (CFPB). RESPA insures that consumers throughout the nation are provided with helpful information about the cost of the mortgage settlement. They also provide additional protection from unnecessarily high settlement charges caused by certain abusive practices. You may contact the Consumer Financial Protection Bureau’s Consumer Response team at 855-411-2372 or 855-729-2372 TTY/TDD.

The Department of Financial Services (DFS) regulates a real estate transaction only if title insurance was purchased as part of the real estate closing or if the title agency established an escrow fund in connection with a closing.

Attorneys, who are in good standing with the Florida Bar Association, are exempted from Florida Statutes requiring a title agent’s license and appointment. As a result, they may handle real estate closings involving title insurance and escrow accounts. If the escrow funds or title insurance for a closing were handled through a title agency owned by the attorney, the transaction would fall under the jurisdiction of the Department of Financial Services. If the escrow funds or title insurance were handled through the attorney’s law office or another location (that is not a title insurance agency) the matter would fall under the jurisdiction of the Florida Bar Association.

If you have issues related to mortgages or mortgage service providers you may contact the Florida Office of Financial Regulation at (800) 848-3792, Option 1 and CFPB’s Consumer Response team at 855-411-2372 or 855-729-2372 TTY/TDD.

TYPES OF POLICIES

There are three types of Title policies. An Owner’s Policy protects the interest of the person purchasing the property. A LeaseHolder’s Policy protects the interest of owners that rent property with long term leases and a Lender’s Policy protects the interest of the lender that issued the loan to the buyer.

COVERAGES AND EXCLUSIONS

Title insurance protects the buyer (insured) against loss or damage due to defects in the title. An example of a title defect could be a prior recorded mortgage, judgment lien, tax lien, and an environmental lien, notice of pending legal action, easement, restriction, or burdensome covenant running with the land.

An owner’s policy should be issued for the full insurable value of the premises which is the sale price of the property. There is no expiration date on the owner’s policy. A Lender’s policy can be issued for any amount up to 125% of the actual loan amount borrowed by the owner. The Lender’s policy only lasts until the loan is paid in full.

Title policies contain exclusions so make sure you review them prior to the closing to make certain you understand the coverage prior to purchase. Some of the more common exclusions are listed as: Defects, liens or encumbrances created or agreed to by the insured after the effective date of the policy; rights to eminent domain; and any law, ordinance or government regulation restricting the use or enjoyment of the land.

RATES

Title insurance rates are established by Rule 69O-186.003 of the Florida Administrative Code. The Rule specifies rates for original owner and leaseholder title insurance coverage, reissue rates, a new home purchase discount, substitution loan rates and other situations. For original owner and leaseholder coverage, the rate is $5.75 per thousand for the first $100,000, then $5.00 per thousand up to $1 million of coverage. The minimum premium for these policy types is $100.00. Anyone issuing a $100,000 owner’s title insurance policy in the state of Florida should be charging the exact same premium: $575. No more. No less.

If a prior owner’s policy exists, reissue rates should be charged. Reissue Rates for an owner’s, a leaseholder, or a mortgage policy, the rate is $3.30 per thousand for the first $100,000, then $3.00 per thousand up to $1 million of coverage. The minimum premium for these policy types is $100.00.

Simultaneous issue rates apply when an owner’s policy and a lender’s policy are issued at the same time, within the same transaction. The owner’s and lender’s rates are that of the original owner coverage: $5.75 per thousand for the first $100,000, then $5.00 per thousand up to $1 million of coverage. The lender’s rate will be a minimum $25 for an amount of coverage not to exceed the limit of the owner’s policy.

ASSESSMENTS AND FEES

As a condition of doing business in Florida, title insurance companies are now liable for an assessment to pay all unpaid title insurance claims and the expenses for any title company ordered into rehabilitation. In addition, a title company who paid assessments on behalf of a title company in rehabilitation must charge a fee on each new title policy written. This fee amount is set by the Office of Insurance Regulation and cannot exceed $25 per policy.

If a title agency wants to be compensated upfront for doing part of the title work, they have the ability to charge a binder fee, which is separate from the escrow funds. The binder fee should be paid before the closing takes place and is paid to the title agency. If the deal falls through, or the sale is closed at another title agency, the binder fee is retained by the agency. If the deal is closed at the same agency that collected the binder fee, the fee must be refunded as part of the closing transaction.

ESCROW ACCOUNTS

An escrow account is a bank account established by a title agency for the purpose of protecting funds being held on behalf of others by the Title Company or agency, generally as part of settlement of a real property transaction. The escrow agent holds the escrow funds until the closing. Usually, a real estate contract requires the buyer to pay earnest money to show their sincerity in purchasing a property. The earnest money paid would be placed in the escrow account and are used to pay charges related to the closing for the property.

An attorney duly admitted to practice law in Florida and in good standing with the Florida Bar Association may handle closings. This attorney may own their law office and a licensed title agency. A properly licensed title insurance agent may act as an escrow agent as for the funds received from others. However, those funds cannot be placed into an interest bearing account without written permission from the owner of the funds. Line 201, Section J of the HUD-1 form will show the amount of earnest money paid by the buyer. As per Section 626.8473(1), Florida Statutes, for a title agent to handle a closing, there must be a title insurance policy issued.

When money is held in escrow by a title insurance agency and the real estate deal falls through, the money cannot be returned until the closing agent receives written approval from both parties; the seller and the buyer. If there is a disagreement over the disbursement, the money must stay in escrow and the agency must report it monthly to their underwriting title company. The buyer, seller or the escrow agent can remand the money to the court and seek a Writ of Interpleader. This instruction from the court will tell the agency where to send the money. Unless the judge rules differently, the court costs are deducted from the escrowed funds.

TAX MATTERS

Most title agencies provide a disclaimer (Tax Agreement) stating where they obtained the tax information and advise the involved parties if the amount is wrong it’s that person's responsibility to pay the difference. This disclaimer is usually provided when the title agent/agency has reason to believe they have been given an inaccurate amount.

For example - A new tax may have been approved, but the property appraiser’s website may still show the outdated tax amount or an old tax bill was brought to the closing. In these instances, the buyer has to pay as they would have paid at the closing had it been known.

DEFINITIONS

Abstract of Title: a compilation of instruments dating back to earliest public records [Spanish land grant or U.S. patent] and includes physical copies of all recorded instruments affecting title to lands being searched.

Title Search: as defined by Florida Statute 627.7711(4), is the compiling of title information from official or public records. The title search provides a brief summary of all the past documents affecting title to the land being purchased.

Clear Title: is one that is free from defects which may encumber the owner’s right to the peaceful enjoyment of the property or which may cause the owner to lose any portion of it.

Easements: as defined by the Florida Supreme Court, are legal rights imposed on actual and physical property; a privilege without profit under which the owner of one property has a right to enjoy that interest over the property interest of another person. An easement is recognized as a legal right of the person using it.

Property Encroachment: occurs when one person’s property extends onto the property of another. This can include fences, bushes, sheds, etc.

Restrictive Covenants: prohibit, limit, or regulate the use, character, kind, dimensions, specifications and locations of the buildings and structures that may be erected and maintained on the land.

Eminent Domain: is the government’s constitutional right to take private property for public use and reimburse the record title holder for the reasonable of the land.

Earnest Money: is usually required from the buyer in order to show their sincerity in entering the contract to purchase property.

Title Defects: are competing or adverse interests in the property’s ownership, usually found upon an examination of the title.

Related Title Services: are commonly referred to as Closing Services should be recorded on the HUD-1 settlement statement Line 1101. The examination of records is no longer a part of closing services as it is considered part of the primary title services. Closing Services include: Services performed by the licensee; Preparing the documents for the closing; Conducting the closing; Disbursing the funds from the closing.

Primary Title Services: should be recorded on line 1108 of the HUD-1 settlement statement and include: The title search; Searching the UCC filings; Examining the title search records; Clearing underwriting obstacles; Determining insurability; Preparing and issuing the title commitment and title insurance policy. These charges are included in the title insurance premium.

Writ of Interpleader: is a court order that would tell a title company how to disburse the escrowed funds in question.

FREQUENTLY ASKED QUESTIONS

Why is it taking so long to get my Deed?

The Deed is the actual document that transfers title from one person to another. This must be recorded by the Clerk of Court’s office and can take time. After the closing paperwork has been processed, the original deed is sent to the Clerk’s office and recorded in the official county records. Once recorded, it gets mailed back to the title agency where the agent will write the actual title insurance policy (if the company requires the Deed to be recorded prior to issuance. Some don’t and will use the actual date the closing occurred.) Once issued, the original deed and the title insurance policy are mailed to the new buyer. If you purchased a mobile home; mobile homes carry titles (like vehicles) instead of deeds. Titles are regulated and issued by the Department of Highway Safety and Motor Vehicles.

When should I receive my title policy?

You should get a Title Commitment at the time of your closing. The actual policy may not be issued for some time depending upon the completion of any underwriting issues and the workload of the company.

TIPS

Keep a copy of your important documents in another location! In the event your home is totally destroyed, you would have copies of all your important documents you may need to settle a claim with your insurance company. This may include a copy of the HUD-1 form, all closing documents, etc.

CONTACT US OR FILE A COMPLAINT

Should you need additional information, you may speak with an insurance specialist between the hours of 8am–5:00pm at one of the telephone numbers listed below:

1-877-MY-FL-CFO (1-877-693-5236)

Out of State Callers: (850) 413-3089

You can also contact us for assistance anytime by email at Consumer.Services@MyFloridaCFO.com. or file a complaint through our “Consumer Help Online”.