Real Property Study Guide - Contract for Sale and Purchase PDF

**Module 8: Contract for Sale and Purchase** - **ACRONYM**: **K 4 P&S** - **Definitions**: - **[Contract For Sale And Purchase]**: An agreement between 2 or more parties consisting of mutual promises which the law will enforce regarding the purchase and sale of real...

**Module 8: Contract for Sale and Purchase** - **ACRONYM**: **K 4 P&S** - **Definitions**: - **[Contract For Sale And Purchase]**: An agreement between 2 or more parties consisting of mutual promises which the law will enforce regarding the purchase and sale of real estate. 1. It is the most important document in a real estate transaction. 2. The one document that dictates the entire process from when you sign until the time you close. - **[Statue of Frauds]**: law which is enacted in almost every state (with different variations) whereby in order for a party to compel specific enforcement of an agreement to convey RP, or to recover remedies for loss of bargain, the essential terms of the agreement **[MUST be contained in a writing]**. 3. Dictates that anything having to do w/ RP, must be in writing to be enforced. - **Basic Contract Principles** (any contract in FL): - **Requirements of a valid K:** 4. **Legal capacity of the parties** - Over 18 and mentally competent (understands the essence of the contract at the time of signing. 5. **Mutual agreement** - Must be [BOTH offer and acceptance] in order to have a binding contract. 6. **Consideration** - Money or something of value exchanged between the parties - NOTE: mutual exchange of promises is deemed valid consideration. 7. **Lawful purpose** - If a contract is to commit a crime or harms public policy, the contract is **[VOID]**. 8. **In writing** - To be enforced. - \*\***Parole Evidence Rule**\*\*: not look beyond the 4 corners of the document; party cannot say "What I really meant..." - **Need for a K for Purchase and Sale** - Parties enter a K for P and S to be consummated at a later date. - In the meantime these are taken care of: 9. Check title work, arrange financing, survey the property, termite, and soil inspection, satisfaction of outstanding liens, inspection and repair of RP, and appraisal 10. All done to be assured that agreement will be consummated. - **Legal Consequences of Executing K for P&S** - Florida has no right of recession, once signed, you're in a legal binding contract 11. **If P/S dies before the transaction is consummated** → their rights and obligations pass in the same manner as other RP interests; either them or their estate had to follow through w/ contract 12. **Risk of loss passes from the S to the P →** seller protects the property on behalf of the purchaser but if something happens to the property (ex: fire) after the contract is signed, unless stated otherwise, the parties MUST go through the deal. - \*\***[NOTE]**: K for P&S doesn't affect rights of 3^rd^ parties not parties to the K (ex: lienor)\*\* - [All consequences happen unless agreed otherwise in a clause stated in the contract. ] - **Process and Terms Common to K for P&S** - Typical process: 13. P makes oral offer 14. S accepts orally 15. P has a broker or attorney draw up K for P&S 16. P signs K and delivers to S ("Offer") 17. S accepts by executing and delivering a signed copy of the K to the P ("Acceptance) - If S rejects but later tries to accept → **ITS TOO LATE** - If S tries to change terms of the K → **S IS MAKING NEW OFFER** - If S stalls, and in interim, P withdraws offer → **ITS TOO LATE** - If S accepts and P later changes their mind → **ITS TOO LATE** - Terms (of the K for P&S) **[\*\*ALL TERMS ARE NEGOTIABLE -- PUT WHATEVER YOU WANT IN THE K FOR P&S UNLESS IT'S ILLEGAL\*\*]** 18. **Date ("effective date")** - The date when the last party executes the contract, when offer is accepted - Contract needs to be date; all other dates relate back to this date 19. **Parties** - **[Sellers]**: - Individuals: use full legal names - Joint ownership: use full legal names of all the sellers and how they held title (TC, TE or JT) - Corporation: use the exact name of the corporation and specify whether it's a FL corporation or from another state which is "qualified to do business" in FL. - Usually signed by the Pres or VP (bylaws govern) - Corporate seal will be affixed to contract - Partnership: not required but best practice is to get the signatures of all the partners - Limited partnership: obtain signatures of all of the general partners - Estates: personal rep will sign - [Personal rep must have the power of sale; if not probate court must approve] - **[Buyer]**: - Show in the same manner as they wish to take title and specify HOW they will take title 20. **Consideration (clause)** - Valuable things that are exchanged between parties 21. **Agreement that S agrees to Sell and B agrees to purchase** 22. **Description of P** - Must contain proper legal description - Rely on description in prior deeds and prior title insurance policies - Include street address and zip so that if there is a error in legal, you might be OK still - Include easements, rights serving the property (ex: parking spaces) - Include inventory and Personalty to be transferred in attach addendum to K (ex: appliances, lighting, fans, & all other easily removable fixture) - Also reference buildings and improvements thereon (ex: a built shed) 23. **Purchase Price And Payment Terms** - Fixed P price -- all amounts to be paid plus deposits - Method of payment -- cash / check / electronic transfer - Earnest money deposit -- money put down by purchaser as a deposit - If held in escrow → agent (title ins., agent, attorney, broker) must be specified and set forth the terms of the escrow agreement. - Typical terms of escrow agreement - Whom and when escrow agent should pay if nothing goes wrong - What to do if either party defaults - Compensation of escrow agent - Indemnification provision compensating escrow agent against liabilities, costs, & expenses incurred \*\*\*agent (escrowee) should be a neutral party where possible and acknowledge deposit w/ a receipt.\*\*\* - Existing mortgages to be assumed or obtained - K should specify the time frame for getting the mortgage and how many loan application should be made - If P is to obtain financing, S would want a provision stating P will use reasonable diligence to obtain loan approval of assumption on existing loan. - \*\*NOTE: "points" -- the point the buyer pays at closing, buys down interest rate (ex: 2 points = interest rate of 4%) 24. **Quality Of Title** - Must be "good and marketable" - Seller has rightful ownership - & no liens or encumbrances on the property except those listed on the contract. - Title insurable at regular rates 25. **Time And Place Of Settlement** - Tender must be made - **[Tender]**: formal offering which is a prerequisite for demand (being able to sue) - Before one party can sue the other, they must be ready and willing to fulfill their obligations under the contract - Ex: court will not allow the seller to sue a buyer who backs out of the deal until the closing date comes and the seller is ready to sell - Include a "time is of the essence provision" - States that timing is important and should a delay occur, the parties will be hurt and may be able to seek damages b/c of the delay - Include how time will be calculate (ex: business days, holidays, etc) 26. **Possession** - When P gets possession, typically happens at closing. But there are some instances where the Seller needs to stay after closing ("holding over") or the Purchaser needs to move in earlier than closing - **[Seller Holding Over ]** - Ex: closing on Aug 13^th^ but seller leaving Sept 1^st^ - Buyer should have seller sign a lease for the time they remain - In the K for P&S, it should provide remedies in case the seller stays longer than agreed - Buyer should seek additional walk through prior to seller leaving - **[Purchaser Moving In Early]** - Lease to be entered for the interim period of time - Same thing above applies - **[Occupancy by Tenants]** - Ex: the contract is for a dwelling that has leases in effect - Buyer should obtain and review the lease BEFORE signing the K for P&S to see if he leases will end or continue and buyer will be assuming them - Proper fire insurance, casualty, and liability insurance should be obtained if any of 3 scenarios occur. 27. **Apportionment ("Pro-rations" or "Credits")** - P and S allocate certain charges between themselves based on the percentage of the period for which the charge is imposed that each one of them is in possession of the property. (ex: HOA dues, property taxes) - Ex: property taxes come out Nov. 1^st^, buyer closes on property on July 20^th^ → buyer responsible for property taxes from closing (July 20^th^) to the end of the year → seller responsible for property taxes from Jan. 1^st^ to July 20^th^ - The amount of prorated charges for the seller will reduce based on what seller agrees to pay. - Taken into account @ closing 28. **Real Estate Transfer Tax** - 3 types - **[Documentary stamp tax]** (state) - This is paid every time a property is sold and paid at closing - Two kinds of doc stamps: stamps on the purchase price (deed) and stamps on the mortgage amount (not paid if paying cash) - **[ALWAYS ROUND TO NEAREST HUNDRED]** - Ex: purchase price is 220,225 & mortgage is 175,110 → purchase price 200,300 & mortgage 175,200 - **[NO NEED TO ROUND IF ALREADY EVEN]** - Formulas: - **DOC STAMP ON DEED**: - **(Rounded number) x.70 ÷ 100** - 200,300 x.70 ÷ 100 = \$1,402.10 (due @ closing) - **DOC STAMP ON MORTGAGE**: - **(Rounded number) x.35 ÷ 100** - 175,200 x.35 ÷ 100 = \$613.20 (due @ closing) - **[Intangible tax]** (state) - Tax only on mortgages; can avoid this tax if not borrowing/financing - Based on the amount borrowed - **[DO NOT ROUND UP]** - Formula: - **(amount borrowed) x 2.00 ÷ 1,000** - 175,110 x 2.00 ÷ 1,000 = \$350.22 (due @ closing) - **[Recording fees]** (county) - Paid at the time of recording all the closing docs and for every doc its **\$10 for the first page & \$8.50 for every page thereafter** on each doc - Who ever is to pay these three taxes is negotiable; depends on what is put on the K for P&S 29. **Municipal Improvements and Violations of Laws, Ordinances, or Regulations** - Seller should promise that they are in compliance w/ all health, safety, zoning and building regulations and related laws in the jurisdiction where the property is located 30. **Condemnation/Eminent Domain** - If the property is either condemned or taken by eminent domain, the purchaser and seller decides what happens 31. **Defaults and Remedies** - Parties can expand or limit liabilities in the K, if not the general rule is as follows: - **[Default by purchaser]** - S may sue for damages - Calculated as the difference between the original purchase price and what the seller eventually was able to sell it for, plus additional costs of the sale - Can't sue for total amount of property; can only sue to cover losses - S may sue for specific performance - where the court ORDERS the buyer to buy; courts don't like doing this \*\*courts prefer option 1\*\* - **[Default by seller]** - P may sue for damages - Calculated as the difference between the original purchase price and the amount it took for the byer to find a similar property, plus cost of sale - Specific performance - where the court ORDERS the seller to sell; courts don't like doing this 32. **Zoning** - Have the seller to promise that the property is currently in conformity to zoning laws if effect - Buyer is subject to whatever zoning laws are in effect even if seller was using the property in violation of zoning. - If P wants to use property for a different use and needs to obtain a different zoning classification → buyer can make sale contingent on getting the property re-zoned. 33. **Purchaser's Right of Inspection** - 2 kinds of inspections - Walk through inspection - Buyer's right to perform as close to closing as possible - Shortly before settlement (10 days generally) - Inspect premises in order to verify that they are in the condition they expect it to be in and that all fixtures remain - NEED TO RESERVE THE RIGHT IN THE K, if not in contract P cannot demand to inspect. - Certified home inspector - To look at all aspects on home construction - Inspection should include at minimum septic tanks, pool, major appliances, heating, cooling etc. - Never rely on relator's recommendation - Best to hire inspector from "American Society of Home Inspector" 34. **Brokers (clause)** - Hired by both the P and S - S -- hires "Listing Broker" - P -- hires "Participating Broker" - K dictates what broker receives commission - General clause needs to be in the K where each party agrees to indemnify (compensate the loss) the other against unknown commission claims from brokers supposedly representing the other party 35. **Merger (clause)** - To be able to sue on the contract after closing 36. **Recording K for P&S** - **[In FL we do NOT record this type of contract in the public records]** 37. **Notices (clause)** - Simple clause stating how each party will notify each other, usually in writing and delivered first class mail 38. **Parties bound (clause)** - Clause states that neither the death of the parties nor an act of God will affect the obligations of parties to the contract 39. **Captions (clause)** - Clause that states that the captions and headings in the contract are not a part of the actual agreement and is only for organizational purposes - "body of contract is what's important" 40. **Integration (clause)** - Clause that says that this doc is the entire agreement between the parties and ANY modifications MUST be in writing to be enforced - Parol Evidence Rule 41. **Negation of Representation by S** - Clause that the seller would want stating that all of the promises that the seller has made are contained in the contract - Ex: buyer cannot claim "he told me it was a new roof" 42. **Preparation of Documents** - Clause specifies who will prepare closing documents (best for attorney to do) 43. **Termite Inspection and Certificate** - Really important in FL - Buyer should reserve the right to have a termite inspector inspect the property - If "wood destroying organisms" are found → buyer should reserve the right to cancel the contract or have the seller pay to repair and re-treat the property - Buyer should state they should pick the termite inspector and independently pick the most reliable inspector available. - Failure of buyer to act on this will constitute a waiver or rights should termites are found after closing. 44. **Provision Regarding Liens and Encumbrances** - Promises from the seller swearing that there isn't any liens or encumbrances on the property - Will also be on the deed and "owners" affidavit and title insurance - **[EXCEPTION]**: in FL construction liens can attach to property after 90 days of completed work, could possibly be attached to the property after closing; seller to swear no construction work has been done which can result in a construction lien 45. **Uncompleted items** - If things needs to be done (ex. New roof) make the buyer's satisfaction with the job a condition to closing. 46. **Rights to Make Tests on Property** - Tests and inspections - If buyer wants to do it, must reserve the right to do so in the contract. - Ex: environmental audits, asbestos inspection, lead based paint etc. 47. **Warranty as to Income and Expense Generated by Premises** - \*\*for commercial prop. bought as investment\*\* - Furnished by the seller to the purchaser to give the purchaser a realistic idea of what to expect w/ respect to how much income the property if generating - Purchaser should request books and records containing relevant financial data - Ex: "the rent from the stores generate 10k; the buyer may say 'if it don't, the seller will have to pay the difference" 48. **Service Contracts** - Should be handled like leases; get copies before you agree to them - Existing service contracts (ex: elevator service) 49. **Attorney Fees and Costs** - Prevailing party entitled to fees in the event of a dispute 50. **Insulation Rider \*\*[for new construction]\*\*** - Required by fed govt. if buyer took out a govt loan such as FHA/VA - Guarantees that the insulation meets govt standards; builder swearing walls/ceiling insulation is thick enough to meet federal requirements - Can attach to contractor or come separately @ closing 51. **Coastal Construction Control Line Rider "CCCL" (state govt)** - In FL, Dept of Natural Resources has created a 50ft setback line around all property either partially or totally seaward - If property falls within this setback, seller must notify the purchaser that it does; purchaser will need to get extra insurance 52. **FIRPTA Rider -- Foreign Investment in Real Property** - Required by IRS - If seller of RP is foreigner: closing agent must escrow 10-15% of sale price (depending on purchase price as to how much they escrow) - This is to make sure capital gains taxes get paid - If there is capital gains, escrow agent pays taxes from escrow and remainder (if any) goes back to seller - If not a foreigner: there's a clause in the contract stating so 53. **Condition: Sale of P's Existing Home** - Contingency clause - Buyer will make the sale of their existing home a condition of the sale of the new home - "If, after adequate effort, P\'s home is not sold by \_\_\_\_\_\_\_\_, P\'s obligations expressly conditioned upon the sale and closing of residency, P may cancel this K." - **Other Types of Real Estate Agreements of Sale** - **Option Agreements** - Option at a later date to purchase property - Seller must sell the property if buyer exercises his option to purchase w/in a certain period of time - Common if the buyer has "lease with an option to purchase" - Language to be added in Option Agreement (in addition to lease) - All of the same essential provisions as K for P & S - Specify that the notice of exercise of the option will be in writing; to be given the manner, place, delivery, and time of notice - Specify the amount for the deposit for option (and if they will retain it no matter what/gets credited towards purchase price) - **Installment Sales Agreements** - **[REAL BAD DEAL]** - Buyer makes payments in installments but doesn't get full title until ALL payments have been made - Rare and dangerous b/c if buyer misses even one payment, seller simply evicts -- no foreclosure - Language to be included in the Installment Sales Agreements - All of the terms of K for P & S - Terms of installment payments & rights and remedies of S if P breaches - **Sale/Leaseback Agreements** - When closing occurs but when the buyer gets the title at closing he rents it back to the seller and seller becomes the tenant and the buyer becomes the landlord - Language to be included in the Sale/Leaseback Agreements - All of the terms of the K for P & S - Provision obligating parties to enter a lease - **Module 9: Deeds** - **Definitions** - **[Grantor]**: seller; the one conveying the property - **[Grantee]**: purchaser; the one buying the property - **[Deed]**: a document that conveys an interest in real property; document that conveys title - **[NOTE]**: it's a conveyance, not a contract - Generally prepared by S's attorney - Much formality derived from common law (**CL**) and still exists today - **Types of Deeds** - **Warranty Deed (aka General Warranty Deed)** - BEST TYPE OF DEED - Governed by FL statute; statute set out the mandatory form of this type of deed - Provides the maximum protection to P (along w/ having title insurance); allows P to go directly after S; has the most promises - \*\*All **covenants (6)** relate to all claims, whenever arising, run w/ the land and survive closing\*\* - **[Present Covenants]** (would be breached @ closing if S was lying) - **[Covenant of Seisin]**: Warrants that the S has possession of the property (**[NOTE]**: may not necessarily be lawful) - **[Covenant of Good Right to Convey]**: S has the right to sell the property - **[Covenants Against Encumbrances Upon Property]**: No liens or encumbrances upon property - **[Future Covenants]** (would be breach in future if S was lying) - **[Covenant of Quiet Enjoyment]**: Warrants that nobody will come in the future and try to evict the purchaser claiming that they have paramount title - **[Covenant of Warranty]**: Warrants that S will defend the P from lawful claims and demands of all persons - **[Covenant of Further Assurances]**: Warrants that S will do whatever it takes to transfer the property to the P - **Special Warranty Deed** - Provides only limited warranties - "nothing coming to haunt the buyer from the time period the seller owned the property/held title" - **Quit Claim Deed** - Least amount of promises - S simply releases the property to P w/ no representations and warranties - Conveys only the interest (if any) which the S had - Rarely used in residential real estate (except to correct errors or divorces) - **[NOTE]**: If K for P & S states "good & marketable title", cannot use quit claim deed - Generally used if title is quite confused and S isn't sure what interests he/she holds and not even sure if title is disputed - **Elements of a Deed** - **Top left** - Name and address of preparer of instrument and who should receive the deed once it is recorded along with Parcel ID; "Return To:" section; NEVER fill in SSN\# - Ex: grantee(s) lawyer or grantee(s) title company or lender - **Top right** - Leave blank; where recording information from the county recording dept goes - If not blank, they won't do the recording - **Date** - Date of execution; should also be inserted into the heading of the deed - If drafting the deed for use at a settlement, leave blank and fill in at settlement - **Names of Grantor and Grantee** - Should be stated w/ greatest possible accuracy - Indicate marital status - \*\*look at prior deed to see how they previously took title\*\* - Grantor - Married: "John J. Jones and Jennifer J. Jones, as husband and wife" - Unmarried: "John J. Jones, a single man" - One of the owners in the previous deed died: "John J. Jones and Jennifer J. Jones, the unremarried surviving spouse of John J. Jones, deceased" - Remarried: "Jennifer J. Smith, formerly known as Jennifer J. Jones and the surviving spouse of John J. Jones, deceased" - Grantee - Use full names - Carefully identify all parties taking title - Specify how title is to be held (ex: husband and wife, joint tenants with right of survivorship, tenants in common) - Specify address so property appraiser knows where to send tax assessment - **Consideration** - Not necessary to recite the amount that was given for the property/purchased price - **Verbiage** "for and in consideration of \$10.00 and other good and valuable consideration.." - **Granting Clause/Words of Conveyance** - The purpose of this clause is to state grantor's intention to convey title to the grantee - **Verbiage** "the grantor hereby grants, bargains, sells and conveys to the grantee, his heirs and assigns forever...." - **Description** - Must be [EXACT] - Ordinarily use the description on the previous deed, may be plated or legal description - **Appurtenance Clause** - **[Definition]**: a thing which is deemed incidental to land when it is used with the land; not part of it but benefits the property - Laundry list of everything that passes with the property - Ex: dedicated parking spot, benefit of easement - **Language Specifying Type of Deed** - Found at the top of the deed and the body - Choices: warranty deed, special warranty deed, quit claim deed - **Encumbrance Clause ("Under the Subject" clause)** - When a deed specifies that property is subject to various encumbrances such as pre-existing mortgages, restrictions created by prior deeds, liens, easements, exceptions, and reservations - Purpose: to give grantee notice of encumbrances - \*\*if an existing mtg is not being paid off, mtg to be identified and to state if grantee is taking subject to mtg or assuming it\*\* = **[RARE]** - **Reservations** - If grantor is reserving (keeping) and interest in property it has to be properly identified (ex: mineral rights); unusual - **Signatures** - **[MUST]** be signed by grantor, grantee need not to sign - 2 witness block for each signature - For corporations: document sealed using corporate seal - Attorney in fact used if grantor is dead - Notary Block - Signed and sealed by notary attesting that they either knew the grantors or that the grantors produced a valid id (**[NOTE]**: no SSN/I.D\# should be listed) - State & County; standard notary language - **Delivery of a Deed** - A deed isn't effective (no legal effect) unless and until it is delivered - No formal, physical act required - May be handed over and no delivery OR deed not handed over and there is delivery - [Delivery happens when the grantor properly manifests an intent that a completed or consummated legal act has occurred] - **[NOTE]**: may be made to 3^rd^ party such as an escrow agent, lawyer, title ins. co. or real estate broker; delivery to this 3rd party constitutes complete delivery by Grantor - Exs: - Grace signs deed and in everyone's presence says \"Now I have transferred my property to Gene" → **YES, Delivery** - Grace signs a deed and delivers it to Gene and says \"Hold onto this deed for me because later I may want to deliver it to you to make you the owner of the property" → **NO delivery** - Grace hands Gene her deed and says \"Record this deed when I die and that will make the property yours" → **NO delivery** - **Acceptance by Grantee** - Grantee **[MUST]** accept; express or implied from the acceptance by the grantee of the benefits of the deed - **Special Deeds and Deeds Clauses** - **Sherriff's Deed** - Sheriff delivers a deed conveying title to the successful bidder - Sheriff sales are public sale of private property in order to: - Execute a judgement for money damages - Execute a judgment for mortgage foreclosure - Unpaid taxes - Sherriff or judicial officer or clerk of court signs the deed and **[NOT]** the prior owners; no warranties (Quit Claim Deed) and **[MUST]**: - Explain basis for judicial sale - Reference court, and docket \# of the case. - **Recording** - Deed must be recorded in the county where property is located - Record new mortgage after deed -- only way to show proof buyer has property **[\*\*NEVER co-mingle funds in the escrow account with personal funds\*\*]** - **Module 10: Recording and Title Abstracting** - Recording is important when priority problems arise; its meant to resolve those priority problems 54. When a transferor grants partial interest in property to successive transferees - Ex: *Laura takes out a mortgage on her property on day 1 and on day 2 takes out another mortgage. Which mortgage company has priority?* - **[Priority = who can foreclose first]** 55. When there are successive transfers of partial and total interest in the same land - Ex: *Laura takes out a mortgage on day 1 and then conveys the property to Alex on day 2* 56. When someone successively purports to transfer the entire estate to different persons - Ex: *Laura sells her property to Kevin on day 1 and then to Jessica on Day 2 and then to Alex on day 3* - Always a question of who has a superior interest - **[GOAL OF RECORDING SYSTEM]**: promote certainty and fairness with respect to interests in real property. - **[GOAL OF EXAMINING TITLE]**: Determine whether defects in title affect marketability of the property (ex: if property has 3 mortgages on it) - \*\*recording info is stored in an underground cave in Pennsylvania\*\* - **Definitions** - **[Abstract (aka "Title Report)]**: complete summary, including recording information of all documents in the public records pertaining to a particular piece of property; the history of the property - **[Abstractor (aka "Title Examiner)]**: person who compiles the title abstract; can be paralegal - **[Chain of Title]**: succession of conveyances of a parcel of land dating from the original source of the title (ownership from beginning of time to present). If there is a problem with the title to the property, it is said to be an \"objection.\" - **[Marketable Title]**: title which is free and clear from all liens and encumbrances; no liens, mortgages, leases, tenancies, etc. - **[Unmarketable Title]**: title which is encumbered or has such serious defects that there is a reasonable chance that it would subject a buyer to adverse claims; aka "cloud" title - **[Title]**: ownership of an interest in real property; if you own the property, you have title - **[Title Abstracting]**: process of gathering information from various public records concerning title to RP; actually creating title - Used to be done by attny opinion, now almost always done by title insurance company - **Recording System** - **[Types of documents that are recorded]** \*\*not complete b/c almost everything gets recorded in public records in relation to RP\*\* - Deed - Conveyance of property - Will of a decedent transferring property - Trust - Sometimes a K for P and S - Mortgage - Assignment of Mortgage - Satisfaction of Mortgage (once mortgage is paid off) - Release of Mortgage - Leases of long duration or Memorandum of Lease **[(FL-1yr or longer)]** - Assignment of Lease - A map or plat of subdivision - Condominium documents - Homeowners Association documents - Easements - Options to purchase - Bankruptcy decree affecting real property - Security Agreement (recorded when you're getting RP & PP) - Liens - Judgments - Lis Pendens - telling the world there may be a claim on a parcel of property that would affect - title - Power of attorney - Financing Statement - Subordination of Mortgage - Recorded docs are to be notarized and witnessed - Anytime doc is recorded, top right-hand side to be free for recording info and needs to be in recordable form - **Mechanics of Recording (Steps)** 57. Take the duly executed, notarized, and witnessed documents to the recording office in the county where the property is located - **[MOST]** common - Electronic filling allowed if office or title company or lender agrees; includes bigger fees - Orange County allow mail in recording 58. Recording office date stamps it 59. Recording office scans entire doc and inserts it into the official record book 60. Doc is indexed - Two ways: - **[Tract Index]** - This is organized by a computerized tracking system based on Legal Description **[(NOT USED IN FL)]** - **[Grantor/Grantee Index]** - Organized by the names of the grantors and grantees; **[(used in FL)]** - **Various Recording Acts** - 3 competing laws: Notice, Race-Notice, Race - **USED IN FL: Race-Notice** - **[RULE]**: Organized by the names of the grantors and grantees - **[GOAL]**: To protect the purchaser of property who buys it for value without notice of prior unrecorded instruments affecting it - **[NOTE]**: not designed to protect done, beneficiary of gift deed - [Requirements]: - For value -- have to pay for it - Diligent inquiry -- see if there's any other things affecting the property - Without notice - Exs: - *Laura sells the property to Kevin on Day 1. He does NOT record. On day 2, Laura sells the property to Jessica. Jessica was unaware of the Kevin transaction, and immediately goes and records as she should. Who wins between Kevin v. Jessica?* - Under FL:'s Race-Notice Statue → Jessica b/c she was an innocent purchaser and did what was right by recording - *Laura sells the property to Kevin on Day 1. He does NOT record. On day 2, Laura gives a gift of the property to Jessica. Jessica was unaware of the Kevin transaction, and immediately goes and records as she should. Who wins between Kevin v. Jessica* - Under FL:'s Race-Notice Statue → Kevin b/c law is only design to protect PURCHASERS of the property and not gifts/donees **[\*\*Adverse Possession and Prescriptive Easement interests in land are not penalized for being recorded\*\*]** - **Title Abstracting** - Process that allows to research the history of the property so that purchaser makes sure there isn't encumbrances or liens - **3 methods** - Abstract Of Title/Attny's Title Opinion (relying on attny opinion) - Obtaining Title Insurance From A Title Company - Having Title Registered Under The Torrens System **[(DO NOT HAVE IN FL)]** - Mutually exclusive -- person only needs one - **Preparing an Abstract of Title** - Title insurance or attny prepares an abstract evidencing the status and quality of title - **[REMEMBER]**: abstract is only history and doesn't tell the purchaser the status of title or the risks involved in ownership - **An abstract contains:** - **LIST ALL DOCS AFFECTING TITLE** (Chain Sheet & Lien Sheet) - Lien sheet: all the liens that have affected the property, when it was filed and when it went away - Heading: the name of the company preparing the abstract, number of the abstract, time period covered and legal description of the property - Transactions in chronological order as they affect RP; each recorded document is briefly (ex: very first deed to most current) - explained from the time the govt. sold the property - Includes: - Full names and marital status of grantors and grantees - Date and type if deed - Legal description of the property transferred - Date of recording and OR (official record) Book & Pg - List of all reservations, restrictions, conditions, covenants encumbrances or other pertinent facts affecting title - Always note removal of **[objections]**: a problem w/ title - **SEARCH THE FEDERAL AND STATE COURTHOUSES FOR ANY OTHER JUDGEMENTS WHICH MAY AFFECT THIS PROPERTY** - **EXPLAIN WHAT HAS AND HASN'T BEEN EXAMINED** - **After receiving an abstract:** - Check the contract for purchase and sale for time limits on the examination of title. - Check for completeness of abstract from earliest public records to current date. Be sure all dates overlap; make sure there isn't a gap - Check for prior title opinions or policies. May want to call to discover why they did or did not \"except\" certain encumbrances. - Do necessary legal research. - Consult \"title standards" - Problem With Using Abstracts Done With Attny's Opinion - abstract is only valid as of a specific date; abstract to be checked for date until closing - docs are examined at face value as being correct; no attempt to verify the accuracy of the docs (mentally incompetent person signing deed, or forged or fraudulent docs) - recording dept only responsibility is to make sure the doc is in recordable form - interests in RP which are not recorded (adverse possession or prescriptive easements) - **Module 11: Title Insurance** - **How Title Insurance Evolved** - Traditionally lawyers examined land records and developed abstracts of title and then rendered legal opinion to their clients - liability under the attorneys\' title opinions was very narrow; many risks were not covered; attorneys could be liable only if it was proven that the attorney was negligent; malpractice suits were costly and lengthy - beginning of 1900s, a movement arose from purchasers and lenders who wanted additional protection: **[American Land Title Association Developed (\"ALTA\")]**; established a uniform title insurance policy; protects owners and lenders from title errors - **Nature of Title Insurance** - **[PURPOSE]**: Eliminate risk and prevent losses caused by defects in title occurring prior to the effective date of the policy; protects against things that happened in the past (as opposed to the future) - **[COST]**: a single, nonrecurring premium; paid at closing - **[Reliefs under policy]** -- title insurance gets to pick - Title Company has the option of paying the purchaser for the loss resulting from the defect (up to the policy limit/value of property) OR - Title Company acquires the right to legally resist the adverse claim (not common) - **[Duration of Coverage]**: - Only for so long as the insured purchaser owns the property. The Owner's Title Insurance **[DOES NOT]** run with the land or protect the next purchaser. - **Covered Areas** **(what title insurance protects you from)** - **Hidden defects** - Defects which are **[NOT]** apparent from careful and prudent examination of all instruments in a chain of title (ex: fraud, forgery, alteration of instrument, lack of delivery, incapacity of parties and limited powers of agents). - **[NOTE]**: these defects are always outside of the scope of an attorney\'s title opinion - **If the person preparing the abstract fails to find a particular instrument** - Ex: there was a prior mortgage that has not been satisfied that examiner missed. The insured would be protected from the missed mortgage - **Errors made in interpreting the abstract** - Ex: reads an assignment of mortgage as a satisfaction of mortgage (drastically different) - **Excluded Areas** **(title insurance exclusions)** - Title defects which are unrecorded, but known to purchaser - Risks which can be ascertained only from physical inspection of the premises - Govt. restrictions on the use of land (ex: zoning ordinances) - Tenants under unrecorded leases - **Who Writes Policies and Who Insures** - The **[underwriter]** is the actual insurer; registered with the state and have put up major escrow accounts w/ FL. - "**[Agents]**" sell for underwriters - Can be an independent company (ex: Title company that writes policies for multiple underwriters) - Can be a direct agent for the underwriter (ex: Old Republic Title that only writes policies for Old Republic Underwriter) - Can be attorneys - Split on premium: Underwriters get 30% and Agents get 70% - Title insurance cost is regulated by the state of FL; same cost no matter what agent you use - **Title Insurance Commitment (aka "[Preliminary Title Report or "Interim Binder]")** - Comes early in the transaction of K for P & S - **DURATION**: from the time you enter the contract till the time you close - **[NOT INSURANCE]** -- it's a commitment to insure at time of closing - **PURPOSE**: to advise the purchaser/lender the status of title and set conditions for issuing a policy at closing; gives advance notice of certain problems and an opportunity to fix before agent can sell title insurance - Want it earlier in the transaction (K for P & S) then later to fix those issues - **Parts Of Title Insurance Commitment** - [Coverage Page] - Preprinted and you do not touch - [Schedule A] - What company will insure - Effective date of commitment - Type of policy to be issued - Lenders or Owners - Amount of such policy - If Lenders: amount of loan - If Owners: amount of property/purchase price - Type of estate - Ex: fee simple, life etc. - Name of insured - Names appearing as what it is on deed or lenders name - Legal Description of property - [Schedule B] - Requirements to be complied with in order for the company to issue a policy of title insurance - Ex: need to get a deed from the seller (grantor) to purchaser (grantee) - List of exceptions to coverage which will be listed on the policy, unless it gets rid of prior to closing - Certain things won't be able to get rid of (ex: neighborhood is restrictions and covenant neighborhood or utility easements) - **Title Insurance Policies** - 2 basic types - [Owner] -- ONLY insures the current owner and not future owners - [Lender ("Mortgagee")] -- insures the lender and all subsequent holders of the indebtedness (owner buying title insurance on behalf of lender) - Also protects a govt agency which is an insurer or guarantor under an insurance contract or guarantee (ex: FHA or VHA loans) - [If you're taking out a loan, **YOU HAVE TO** buy this] - Owner can buy this solely or buy both owner's and lender's - **Owner's Title Insurance Policy includes**: - [Cover Page (\"Declaration Page\")] - [Schedule A] - The effective date of the policy - Day of closing and exact time - Name of the insured - Exactly stated on deed - Amount of insurance - Purchase price of property - Description of estate or interest covered and applicable recording info - Fee simple, life etc. - Legal Description of the property - [Schedule B] - General pre-printed exceptions (\"Standard Exceptions\"); on all title insurance policies - Taxes for the year of the effective date and taxes or special assessments which are not shown as existing liens in the public records. - Rights or claims of parties in possession not shown in the public records (ex: adverse possession) - \*\*Must be waived if the seller signs an affidavit stating that there is no person in possession of the property or with a claim of possession\*\* - Encroachments, overlaps, boundary line disputes and any other matters which would be disclosed by an accurate survey and inspection of the premises - \*\*To waive this exception a current survey (less than 90 days old) must be obtained. Look at the survey to make sure: - The survey was made by a Florida registered professional land surveyor and was dated signed and sealed - The survey contains an adequate and accurate legal description which agrees with that in the deed or mtg. - Should show visible boundary lines, locations and dimensions of improvements, locations or utilities, easements, rights of way of record (has to be as built survey) - Encroachments or discrepancies between the description in the recorded instrument and the property which is actually used or occupied - Easements or claims of easements not shown by the public records - Any lien or right to a lien, for services, labor or material heretofore or hereafter furnished, not shown in the public records (ex: construction liens) - \*\*waived by seller's affidavit stating that no work has been done on the property within the last 90 days\*\* - **Mortgagee Title Insurance includes:** - [Cover Page (\"Declaration Page\")] - [Schedule A] - Same as owner policy except description of insured mtg is included instead for amount of insurance - [Schedule B] - Only exception is the lien for taxes - Common "Endorsements" - **[Endorsement]**: Amendment to the policy which provides additional coverage; tailors the standard form to a particular transaction - **Condominium Endorsements** - Used only in connection with mortgagee policies - Provides protection regarding standard condominium docs, reviews restrictive covenants and makes determine regarding violations thereof, no claims of record for condo assessments - **Planned Unit Development Endorsements** - Used only in connection with mortgage policies - Ex: Celebration has a mixed use of development; residential and commercial properties are a part of the community. - **Variable Rate Mtg Endorsements** - **Revolving Credit Endorsements** - **Environmental Protections Lien Endorsements** - Only in connection with mortgagee policies - **Marketable Record Title Act** - **PURPOSE**: extinguish ancient defects and stale claims (over 30 years old) against the title to the property. Reasons why you need title insurance: **[Article Summaries]** - [Felon Using Fake Deeds] - Javon Rendard Walden, 37, pleaded no contest to organized fraud after using fake deeds to claim two Volusia County homes. He faces two years in prison, probation, and restitution. The case was reopened following investigative reports and public outcry. One fraud involved a deceased woman\'s home, with forged documents used to transfer ownership. A victim continues to battle for property rights in civil court. Free property fraud alerts are available in Central Florida to combat such schemes. - [FL Real Estate Broker Using Fake Deeds to Sell Properties] - Michael Bogsted, a Florida real estate broker, was charged with a scheme to defraud after allegedly using forged documents to claim ownership of six properties worth over \$1 million. Targeting homes nearing tax auctions, Bogsted reportedly falsified deeds and documents, filing them online to transfer ownership. He then sold the properties or secured loans, profiting \$327,000. Arrested at his home, he posted \$150,000 bail. Authorities began investigating in 2019, uncovering the elaborate fraud.