What is Title Insurance?
Title Insurance protects owners and lending companies 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 a given property has clear title (e.g. there are no known encumbrances/ obstructions to full ownership and control of the property), it is much less vulnerable to ownership claims from outside parties and/ or unpaid debts of previous owners. Clear title – and a “title insurance” policy to protect against losses arising from problems with title to the property that were unknown to you when you purchased it – is a prerequisite to obtaining a mortgage loan from an institutional lender to purchase real estate in Florida.
There are essentially two types of title insurance policies that protect against adverse claims to title to real property. (a) An “owner’s policy” protects you as the owner of the estate. If your owner’s title insurance policy is issued upon your purchase of the estate, it covers up to the full amount you paid for the estate; if it is issued at any other time, it covers up to the reasonable value of the property at the time of issuance. (b) The “mortgagee’s policy” protects your lender/ mortgagee, if any – the holder of a debt secured through a lien on your property. The mortgagee’s title insurance policy covers only up to the full amount of the mortgage and, thus, its coverage declines as the mortgage is paid.
A. Why do YOU need Title Insurance?
When you set out to buy real estate, you of course want to know that the person from whom you are purchasing the property actually owns it (e.g. holds the deed 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. A well-drafted and properly executed title insurance policy can protect your property interest from such adverse claims.
B. How does title insurance work?
Before underwriting your title insurance policy, your title insurance agent will search 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. If you employ an experienced Florida title insurance attorney to conduct the title search, you will likely obtain additional security in this regard, as attorneys know to look for encumbrances not listed in the public records (e.g. unrecorded building code violations) as well.
The recorded defects in title are reported to you and your lender prior to your purchase of the property by way of a title insurance commitment, at which point you may ask the Seller to correct them and reject the contract if he fails to do so, or, alternatively, accept the contract subject to whatever liens are known to you. 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 are not discovered by your title insurance attorney prior to the issuance of your policy, you are exempt. Your 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.
Contact an Experienced Title Insurance Lawyer
If you would like more information about this topic, contact Lawrence Tolchinsky to find out how he can help you. You can contact him by phone at 954-458-8655 or by e-mail through this web site to schedule an appointment and learn more about title insurance. He offers a free initial consultation.
To learn more about Lawrence Tolchinsky, click on this link: Title Insurance Attorney