Legal Issues That Matter


New disclosure on deeds in Miami-Dade

Miami-Dade County now requires that, if you are a developer of new residential property in the county, and the property is subject to pending or existing a special taxing district, you must disclose that fact on the face of the deed, conveying the property to the buyer. 

The statement on the face of the deed, must be as follows:


________________________         ____________

Signature of Purchaser                     Date

The new law is effective as of February 16, 2018, and is implemented 90 days after that date. The statement must appear on the face of the deed, be signed by the purchaser/grantee, and acknowledged (notarized). Of course, the blank lines would need to have complete information about the name of the taxing district and for what purpose the district is created.


Orange County Property Fraud Alerts

Phil Diamond, the Orange County Comptroller (the guy who oversees recordings of deeds, mortgages, and any other Official Records related to real estate and identity), announced today that his office now provides automatic alerts to subscribers who sign up for them.

Using the office's online system, subscribers can sign up to be alerted whenever a document is recorded in the Official Records with a name that matches the subscriber's. The service is free and recommended for everyone who is concerned about identity or property theft.

Users can subscribe for free here:


Seller financing and land trusts

We are often asked whether a land trust can be used in a seller-financing transaction to avoid the need for judicial foreclosure in the event of the buyer-borrower's default. In such a scenario, the property would be conveyed at closing to a third-party independent trustee who would hold title to the property until the purchase money note is paid in full. If the buyer-borrower defaults, then -- under the terms of the land trust -- the trustee would convey the property back to the seller-lender.

There are a couple of problems with this scenario in Florida. First, if a buyer is buying a property to occupy it as their primary residence, they will find it difficult if not impossible to obtain the Florida homestead tax exemptions or creditor protections while the property is held in the name of a third-party trustee. To obtain the tax exemption, the occupant must have at least an equitable interest in the property being occupied. In the case of a true Florida land trust, all equitable and legal title vests solely in the trustee. At that point, the buyer has no equitable interest that would be subject to homestead tax exemptions or creditor protections.

Secondly, Florida does not allow non-judicial foreclosures except in timeshare mortgage and assessment lien foreclosure actions. While it is common to see the land trust with a primary and secondary beneficiary used for hard money loans with real estate investors, those avoid judicial foreclosure mostly because the parties involved are looking at it solely from an economic rather than an emotional standpoint and are willing to work together to avoid the need for a formal judicial foreclosure. However, when the property in trust is occupied by the borrower, it has been our experience that the borrower is not willing to go down without a fight. In that case, judges consistently have required the lender to file a mortgage foreclosure action while disallowing the summary ejectment of the borrower from the trust property.

If a client is selling or buying a property, using seller financing, we will review their situation and advise them -- in most cases -- to stick to the traditional note and mortgage or agreement for deed, knowing that they may be forced to judicially foreclose the borrower's equity of redemption in the future.


Out with the O&E Report; In with the Property Information Report

On June 23, 2017, Florida Statute Section 627.7843 was amended significantly. Many real estate investors and others are intimately familiar with the Florida Ownership and Encumbrance (O&E) reports that title insurers and agents have issued for years. Those reports were typically limited in scope as compared to a title search report or a title insurance commitment and policy. For instance, an O&E report typically listed only the current property owners, some of the easements, and liens or mortgages of record. The liability of the issuer of the report could limit its liablity for mistakes in the report to a maximum of $1,000.00.

The Property Information Report (PIR), in contrast, can be issued by anyone. There is no requirement that they be issued by anyone with any type of license or experience in title abstracting or examining. The PIR can include as much or as little information about the property's title as the requestor wants. For instance, it may include as little information as the names of the vested owners, or as much as information from the State Corporation's databases, all liens, easements, and pending litigation records related to the property. Unlike the O&E Report, if particular language is included in the PIR, the issuer's liability is limited to a refund of the amount that the requestor paid for the PIR. Therefore, if the issuer made mistakes in the PIR that cost the requestor hundreds of thousands of dollars, the issuer would only have to refund to the requestor the amount that the requestor paid for the report, even if that amount is as little as $50.00. 

Contrast this with an opinion of title from an an attorney. If an attorney makes a mistake (commits malpractice) in preparing a title opinion for a client, there is no limit on the damages that the recipient of that opinion can seek. Also, contrast this with a title insurance commitment and policy where the damages that the insured can seek are limited only to the face amount of the title policy. 

Since a PIR can now be issued by anyone, whether an attorney, title agent, or Joe Schmo off the street, and damages are limited to the amount paid for the PIR, we recommend that clients be wary of requesting or relying upon such PIR's when making major financial decisions in buying or investing in real estate. Even when considering purchasing a property at a foreclosure auction, one should be wary of relying upon a PIR which may miss the priority of the mortgage being foreclosed, or other major issues. If anything, PIRs should only be used as a first step in evaluating a property (i.e. prior to preparing a letter of intent), but should not be used for final and potentially expensive decisions.


Sloppy Titling Real Estate Assets in Self-Directed IRAs

We've noticed over the past few years that clients have gotten sloppier in how they title mortgages and real estate in their self-directed Individual Retirement Accounts (IRA) and retirement plans. Florida has a specific statute that dictates exactly how such assets must be titled in order to avoid the necessity for a title agent to review the custodial agreement or inquire as to who is required to execute the documents on behalf of the custodian.

Lately, we have seen a lot of assets titled as "IRA Custodian, Inc FBO #123456789." This is technically legally deficient. The law requires that assets be titled as, "IRA Custodian, Inc. as custodian or trustee for the benefit of   (name of individual retirement account owner or beneficiary) individual retirement account.” If the custodial account is a retirement plan, then the asset must be titled as, "IRA Custodian, Inc. as custodian, or trustee of the  (name of plan)   for the benefit of (name of plan participant or beneficiary).” Florida Statutes Section 689.072 (2006)

To title the asset in any manner that doesn't follow the statutory language to the letter runs the risk that a title agent, examiner, or underwriter may demand production of the custodial agreement for review prior to closing the purchase, sale, or refinance of the asset. That may be the least of a client's problems, however. If the asset is a mortgage and note, it is conceivable that a defaulted borrower could demand production of the custodial agreement or raise the defense that the custodian has no authority to foreclose until the custodial agreement is produced, and the power to foreclose is proven.

We would encourage anyone who is using the self-directed IRA or retirement plan through a custodial account to follow the statute to the letter when titling the self-directed asset whether in a deed, lease, or mortgage and note. Doing so will provide the benefit of a statutory presumption that the custodian has the full power and authority to protect, conserve, sell, lease, encumber, or otherwise manage and dispose of the real property described in the recorded instrument without joinder of the named individual retirement account owner, plan participant, or beneficiary. 

If the assets are held in a "checkbook-control" IRA limited liability company, or within a land trust, the title agent will likely never realize that the statutory language hasn't been used, so there may be no issue. However, we would still counsel that the statutory language be followed to the letter even when titling within the LLC or land trust to avoid the potential problems. While a client may lose a little privacy when their name is published as the beneficiary or plan participant, that loss of privacy is nominal when compared to the other issues that can arise. 

Finally, we advise that the beneficiary's or plan participant's name should never appear in the asset's title together with the plan's account number. This causes problems with redaction requirements later should litigation ever arise in relation to the asset.