WITH MANY TITLE COMPANIES CLOSING THEIR DOORS, ARE YOU WONDERING WHERE TO GET TITLE POLICES AND WHO CAN DO YOUR CLOSINGS?
The spiral downturn in the real estate market caused title companies to take an especially hard hit. Brokers and their agents, who once relied on their favorite title company, are now faced with the task of searching for a new place they can trust. They need a place to bring their closings and a place that can issue that necessary title policy. I know of such a place. It’s your local real estate attorney.
During the real estate boom there was so much work for everyone that real estate professionals, more often than not, looked to the closest and best title company to assist them with their closings. Once they developed a relationship with that certain title company, they did not need to look anywhere else for quality closings.
For this reason, many brokers and their agents have never had the opportunity to work with a real estate attorney. Unlike title companies, many real estate attorneys were able to weather the real estate crash by assisting individuals with short sales, loan modifications, foreclosures and civil lawsuits. Now as the real estate market starts to slowly climb back, those without their trusted title company should consider taking their business to a real estate attorney.
Most attorneys who specialize in real estate law usually have the ability to write a title insurance policy and conduct closings. More importantly, if legal issues arise, they are capable of expediently resolving these issues before crucial deadlines that can sometimes make a deal fall completely apart.
While many states, require the services of a licensed attorney for all real estate transactions Florida is not one of those states. In Florida, an attorney is not required for the issuance of a title policy or to close real property. Notwithstanding that fact, many Florida brokers realize the value of having a real estate attorney at closing and wouldn’t think of doing it any other way.
Still some Brokers may be reluctant to take their real estate matters to an attorney. It is a common misconception that it is more expensive to get a title policy or have a closing conducted with an attorney. However, the cost of title insurance in Florida is promulgated, which means that the rates for that type of insurance are set by the State. Therefore, it is the same price for the policy regardless of who does the issuing. More importantly, having a real estate attorney on your side may actually save money.
A real estate attorney has typically reviewed hundreds of real estate documents. They are familiar with titles to real estate and real estate transactions in general. They know what to look for and how to spot and avoid potential problems. Most importantly, a licensed attorney is the only person who can give you legal advice.
Give us a call and tell us about your next deal. You will be pleasantly surprised to find our doors are open and we will be pleased to issue that title policy and close your transaction.
If you purchase a foreclosure home and there is a tenant on the property you should provide them with the 90 day notice as soon as possible. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203, 124 Stat. 1376, 2204 (2010)) amended the Protecting Tenants at Foreclosure Act of 2009 (“PTFA”) to further define the date of notice of foreclosure as the date which complete title to the property is transferred; therefore, a new owner must have the Certificate of Title before providing a 90 day notice to a tenant. While determining if the tenant has a “bona fide” tenancy, it is good practice to provide the 90 day notice immediately once the Certificate of Title is issued.
It is important to understand that there are people who are taking advantage of the PTFA. Some homeowners will create a lease that is largely in favor of the tenant and charge a minimal rent rate and rent the property to friends or family. The PTFA has addressed this in the Act. It makes clear that it only provides protection to certain types on individuals residing on the property. The PTFA specifically states:
The protections of this law apply to tenants under a “bona fide” lease or tenancy. A lease or tenancy is “bona fide” only if: (1) The mortgagor or a child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) The lease or tenancy was the product of an arm’s-length transaction; (3) The lease or tenancy requires the receipt of rent that is not substantially less than fair market rent or the rent is reduced or subsidized due to a federal, state, or local subsidy.
(Pub. L. No. 111-22, Div. A, Title VII, 123 Stat. 1632, 1660-62 (2009)).
If you are thinking about purchasing a property at a foreclosure sale, it is really important to do adequate research to determine if there is anyone residing on the property because tenants do have protections under the PTFA. Be aware too that if you purchase a property that someone resides in, it may take extra time and money to evict or eject the tenant. On the flip side, if you are looking to rent the home you purchased, you may end up with a great tenant who is ready to pay you rent, without having to do any more work on your own!
1. What is the Dodd-Frank Act? It is a law passed in 2010 and named after Barney Frank, a former congressman from Massachusetts and Christopher Dodd, a former senator from Connecticut, who sponsored the law. The law’s primary purpose was to address the excesses in the marketplace which led to the real estate bubble and subsequent collapse, and specifically, to provide legislation that would eliminate the taxpayers bailing out “too big to fail” banks and financial institutions.
2. What is in the law? The scope of the law is enormous. The law itself is 848 pages and the regulations interpreting and enforcing the law are in excess of 14,000 pages. Congress was not only concerned about taxpayer bailouts but was also concerned with “predatory lending” to consumers. As a result, banks, financial institutions and even individuals who lend money to consumers and take as security a mortgage on a primary residence are covered by the law.
3. How does the law affect real estate locally? Banks and other financial institutions have huge regulatory burdens to overcome to assure that the loans which are made satisfy the criteria established in the law. Sanctions for violations of the law are extremely punitive and for the most part, banks will err on the side of caution when deciding whether to make a loan to a customer on a primary residence. The net result is higher bank fees and fewer loans made as a result of the regulatory costs and thresholds placed on banks.
4. How does the law affect individuals? Sellers financing the sale of their own property are covered under the rule. Thus, if you are representing an owner who is willing to hold the mortgage on the sale of his or her property, you must make sure the attorney or title company closing the transaction is aware of the regulations of Dodd-Frank. In short, one who owns property can finance the sale of 3 properties on any one 12 month period. However, the seller must not have constructed the home under contract, the financing must be fully amortizing (no balloon mortgages!) and the loan must have a fixed interest rate or an adjustable interest rate with “reasonable” lifetime limits on rate increases. The rule is better if the seller is only financing one home in a 12 month period as the mortgage can contain a balloon provision.
5. What if I want to finance the purchase of a residence from my child or other family member? You can’t do it. The type of financing is not allowed under Dodd-Frank.
6. What are the sanctions for a violation of Dodd-Frank? There are several but one is a $1,000,000.00 a day fine.
7. What are exemptions or ways to avoid Dodd-Frank? Forget about it-there aren’t any absent conventional financing, financing through a mortgage broker or complying with the limited owner financing rules mentioned above.
This Article was sponsored by the Bay Area Real Estate Council (BAREC) and written by Richard “Rick” A. Miller. Rick, a Board Certified Real Estate Lawyer, is a Board member of BAREC and a Managing Partner at Miller, Crosby & Miller, P.A., 2323 South Florida Avenue, Lakeland, FL 33803. Rick may be reached at (863) 688-7038.
Many young Americans continue to hold the prospect of home ownership in high esteem despite facing rising rental costs, tougher loan regulations, and staggering student loan debt. According to Gallup’s 2013 Economy and Personal Finance survey, approximately 70% of Americans aged 18 to 29 currently do not own a home, but they plan on buying one within the next 10 years. Young Americans cite several reasons for desiring home ownership, including: lack of building equity, inability to alter their living environment, and unpredictable rent increases.
One of the main factors impacting young Americans’ ability to become homeowners is high rental prices. Trulia reported the average annual rental increase to be 3.9%—far outpacing inflation and income growth. In addition to receiving lower salaries, over half of young Americans spend 30% or more of their income on housing; in 1960, only a quarter of renters spent that much (according to the Harvard Joint Center for Housing Studies). With data like this, it is no wonder young Americans have trouble buying a home.
To further compound the situation, the FHA recently announced it was drastically reducing loan limits for FHA-insured loans. The FHA also reset metropolitan statistical (MSA) median home prices to 2008 prices instead of 2007 prices (when prices were at a peak), which previously prevailed. Thus, young people are less able to receive the loan amounts necessary to purchase a home in higher paying areas.
Finally, many young Americans are saddled with substantial student loan debt, which is often times coupled with high interest rates. According to a report released on December 4, 2013 by the Institute for College Access and Success’ Project on Student Debt, the average student loan debt for graduates of a four year college is $29,000.00. Approximately seven in ten seniors graduated with student loan debt. With a monthly loan payment of several hundred dollars, today’s young people simply cannot save enough money to afford a home.
Although challenges to home ownership exist for young people, the desire to own a home is definitely there. Despite the negative data, there can be a positive side from a Realtor® standpoint. For instance, approximately 21% of young Americans already own a home. Considering this fact with the fact that 70% of young Americans desire home ownership indicates there are very few young Americans who have no intention of becoming homeowners.
What does this mean for Realtors®? Young Americans can be a large customer base. As such, there are a couple of things sales agents should be doing. First, agents should include renters and young adults in their marketing campaigns so the agent comes to mind when they are ready to buy. Second, agents must become familiar with all financial tools and programs that would benefit this segment of the population (e.g., lease-option contracts, student loan consolidation). If an agent can make it financially feasible, there is a high likelihood of making the dream of home ownership a reality for young adults.
With the increase in the number of foreclosures, this is a common question. There have been many instances of unsuspecting renters who sign year-long leases, and suddenly are forced out of the home by a new home owner. In order to curb this problem, the Federal Government enacted the Protecting Tenants at Foreclosure Act of 2009 (“PTFA”). The PTFA provides protection to individuals with a “bona fide tenancy”, and requires a 90 day notice before evicting the tenant from the property. Protecting Tenants at Foreclosure Act of 2009 (Pub. L. No. 111-22, Div. A, Title VII, 123 Stat. 1632, 1660-62 (2009)). In addition, the PTFA provides that if the tenant has a “bona fide” lease, the tenant may be permitted to stay in the property for the term of the lease. Id. While the PTFA is a Federal Law protecting the tenants rights, it is important to note that state law is still in effect. Landlords and tenants must still abide by Florida Tenant and Landlord law and, for example, tenants are still required to pay rent timely and may be evicted for nonpayment.
I AM A REALTOR AND I HAVE A BUYER WHO IS LOOKING TO CHANGE A FEW WORDS IN A CONTRACT. IS THERE ANY REASON I SHOULDN’T MAKE THESE CHANGES FOR MY CLIENT?
The field of real estate is riddled with risk and reward. Although Realtors have an increased knowledge of real estate and contract law, there have been many instances in which improper drafting of contracts leads to litigation, a damaged reputation, loss of commission, and in some cases, revocation of the individual’s license.
In a case before a Florida appeals court, a transaction broker assisted in drafting a contract for the purchase of real property. The contract required the balance of payment at closing and in an addendum prepared by the broker, the following language appeared:
If buyer does not close by January 26th, 2005 the buyer is to pay seller 12% interest, which is to be paid monthly. Failure to do so makes this contract null and void, and all monies paid are nonrefundable. Seller will only carry a mortgage for an additional six months from January 26th, 2005. Therrien v. Larkins, 959 So. 2d 365 (Fla. 5th DCA 2007).
At closing, the buyer believed he had three options, one being that he could tender a note and mortgage as “payment” of the purchase price. The lower court agreed and held that the seller needed to close the transaction. However, the seller believed the contract was not intended to permit the buyer to purchase the property by offering a note and mortgage. On appeal, the court agreed with the seller. It held that because the contract did not grant the buyer a specific right to present a note and mortgage at closing, the seller was not obligated to close by accepting the note and mortgage. (Id. at 367).
The court had this to say about the drafting:
…the contract and addendum in this case were drafted by a transactional broker on a FAR/BAR form. This lawsuit is an excellent example of why lawyers, and not brokers, should draft contracts in complex real estate transactions. Had the broker suggested that an experienced real estate attorney draft the contract, he might now be enjoying the $22,500 commission called for in one of the less ambiguous clauses of the contract. (Id. at 369).
Real estate professionals commonly find themselves in precarious situations while trying to assist their clients. To protect your real estate commissions and keep your reputation intact, work with a real estate attorney to draft or revise contract language. This will limit the potential risks and allow you to reap the profession’s rewards.
A TITLE COMPANY GAVE ME GIFT CARDS FOR REFERRING MY CLOSINGS TO THEM. CAN I GET IN TROUBLE FOR THIS? IS THIS LEGAL?
In Florida, a real estate licensee may not receive a referral fee/kickback (or anything of value) for referring buyers to a title company. There are several national and state laws that prohibit such kickbacks and proscribe hefty civil and criminal penalties for violations. One of the most prevalent laws is the Real Estate Settlement Procedures Act (RESPA) (codified at Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§2601-2617).
RESPA was enacted in 1974 to provide consumers with disclosures about closing costs and to prohibit kickbacks and referral fees. RESPA covers transactions involving federally related mortgage loans (e.g., home purchase loans, refinances, lender approved assumptions, property improvement loans, equity lines of credit, reverse mortgages). Certain transactions are not covered under RESPA, including: cash sales; sales where the individual home seller takes back the mortgage; and rental property transactions.
Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business. A violation of this section can result in a civil or criminal case being filed against the real estate agent. In a civil lawsuit, a person who violates Section 8 may be liable to the person charged for the settlement service in an amount equal to three times the amount of the charge paid for the service. In a criminal case, a person who violates Section 8 may be fined up to $10,000 and imprisoned for up to one year.
Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.
In addition to the Federal penalties, Florida law may also penalize real estate agents under these circumstances. Pursuant to section 475.05, Florida Statutes, the Florida Real Estate Commission has the power to create rules, enact bylaws, and decide questions of practice regarding real estate agents. One of the regulations enacted by FREC, pertaining to kickbacks, is Fla. Admin. Code R. 61J2-10.028 (2012), which states:
Any real estate licensee who receives, or makes any arrangement or agreement to receive, directly or indirectly, any kickback or rebate, for the placement of, or favor in, any business transaction which forms a part of, or is incident to, any transaction(s) negotiated or handled by said licensee, is a violation of Section 475.25(1)(b) or (d), Florida Statutes…unless prior to the time of the placement of, or favor in, said business transaction, the licensee shall have fully advised the principal if any and all affected parties in the transaction(s), which the licensee is handling, of all facts pertaining to the arrangement of kickbacks or rebates.
A violation of this regulation may result in any one or all of the following punitive measures: license suspension or revocation; probation; a fine of up to $5,000.00 per offense; or reprimand. §475.25, Fla. Stat. (2012).
Due to the increasing crackdown on questionable real estate practices (especially in the foreclosure arena), real estate licensees and title companies would be well-advised to follow these laws closely. Otherwise, a $100.00 gift card could result in license revocation, or worse.
I bought this condo to lease however, the Association said I could not lease it. Is that legal?
Funny you should ask. In the past month, I have had occasion to review two separate legal issues on this very subject. In the first instance, person owns a condo that is underwater. The person decided to rent out the unit. The Declaration of Condominium prohibited leasing unless the HOA approved the unit owner for a leasing permit. A leasing permit was only allowed for 25% of the total number of units. What does that mean? Once 25% of the units are rented out, you are placed on a waitlist until a leasing permit becomes available, if at all.
Another person came to me because the HOA recently amended their Declaration to include a 20% cap on leasing. The Declaration at the time of purchase contained no previous leasing restrictions.
Are leasing restrictions on condominiums valid? The Florida Supreme Court addressed this issue in a case we will call Woodside. Woodside Vill. Condo. Ass’n, Inc. v. Jahren, 806 So. 2d 452, 456 (Fla. 2002). In Woodside, the Court explained that Florida law “expressly recognizes that a declaration of condominium may contain restrictions concerning the use, occupancy, and transfer of units.” In Woodside, the Declaration was amended to include leasing restrictions after two owners purchased their units. The Declaration at the time of purchase contained a leasing provision that permitted an owner to lease their unit without prior HOA approval for a period of one year or less. The amended leasing provision required all leases, subleases and assignments of leases to be approved in advance by the HOA, and restricted the lease term to a total of nine (9) months in any twelve (12) month period. The Court explained that since Florida law and the Declarations provided broad legal authority to amend the declarations, “courts have recognized the authority of condominium unit owners to amend the declaration on a wide variety of issues, including restrictions on leasing.” For those reasons, the Court found that “the lease restriction amendment was properly enacted under the amendment provisions of the Declaration, and that the respondents took title to their units subject to the amendment provision set out in the Declaration and authorized by statute.”
Properly adopted leasing restrictions will be presumed valid unless the restriction is arbitrary, against public policy, or in violation of some fundamental constitutional right. The Court in Woodside recognized the concerns leasing restrictions impose on purchasers of condominiums for investment purposes, but explained that the Court is constrained to the view that this issue is better addressed by the Legislature.
In sum, Florida law permits leasing restrictions. Declarations that previously contained no leasing restrictions at the time of purchase which are subsequently duly adopted to impose leasing restrictions, will subject both current and new owners to those restrictions.
written by Beejal P. Thakore, attorney at Davis Basta Law Firm, P.A.
Florida’s homestead law is one of the most generous in the United States. Florida’s Constitution provides that homestead is (1) exemptfrom forced sale; (2) devise and alienation is restricted; and (3) homestead affords tax exemptions. Of primary importance to real estate agents are the restrictions on alienation of homestead property.
Article X, section 4(c) of the Florida Constitution is clear that both spouses must join in a transfer of homestead property. However, when real estate is owned by only one spouse, and homestead status is not obvious, the requirement that both spouses sign a sales contract may be overlooked. This situation arose in Florida and was the subject of an appellate decision known as Taylor v. Maness, 941 So. 2d 559 (Fla. 3d DCA 2006).
In the case, a husband (Mr. Maness) entered into a contract to sell a home that he was living in by himself (while his wife temporarily resided elsewhere); title to the home was vested solely in the husband’s name. The contract was not signed by the wife, and she refused to sign the deed at closing. The buyers (Mr. and Mrs. Taylor) sued for specific performance on the contract, fraud in the inducement, and negligent misrepresentation. In considering whether the wife could be forced to specifically perform the contract, the court said that the contract could not be enforced by specific performance because of the constitutional homestead exemption from forced sale. The court determined that the property was homestead property as the permanent residence of the husband and wife; and the wife had a marital homestead interest in the property that protected the property from sale without her consent.
The buyers argued that the failure to file a homestead tax exemption on the property was an indication that the home was not the couple’s homestead. However, the court stated: “failure to claim the homestead tax exemption is not evidence that the property is not in fact homestead.”
The most important aspect of this case for real estate agents is that it emphasizes the importance of ascertaining whether property is a homestead at the outset. A real estate agent (based on the outcome of the case) should never rely on the fact that no homestead tax exemption is filed when determining whether a property may be subject to homestead protections. Because Florida’s homestead law is liberally construed in favor of protecting a family’s home, a thorough inquiry must be made into homestead status any time one spouse attempts to convey real estate without the other spouse’s signature on the sales contract.
I HEARD THAT I MAY HAVE LOST COVERAGE UNDER MY OWNER’S TITLE INSURANCE POLICY WHEN I TRANSFERRED MY PROPERTY TO AN LLC. IS THIS TRUE?
Yes, it can be true. Sometimes it is difficult to get a loan in a Trust or in a limited liability company (LLC). Often, investment buyers are advised to purchase the property individually and then transfer the property to an LLC by using a quit claim deed. There are several reasons why this may not be a good idea, including the fact that you may lose your title insurance coverage.
This can cause significant problems for individuals who transfer their ownership interest into a trust or business entity, even when they do it simply for estate planning purposes. Oftentimes, the owner of the property is not actually selling or transferring the property to a different person, but rather to an entity that is controlled by them.
Under the 1992 ALTA Owner’s Policy, an insurer will likely deny coverage for a claim made after a voluntary conveyance via a quitclaim deed by the insured to an LLC or Trust. The rationale behind this is the insured did not retain an interest in the property. To address this problem, the 2006 ALTA Owner’s Policy expanded the definition of an “Insured” to provide coverage under the Policy to an insured that transfers title in the following instances: (1) to a trust in which the owner is a trustee; (2) to a LLC where the grantee is the sole member of the LLC; or (3) or to a Partnership, where the insured is a partner. This language provides superior coverage over the 1992 ALTA Owner’s Policy; however there are still common transfers that will be denied coverage.
Before transferring your property, for any reason, consult a real estate attorney. In this situation, a real estate attorney may recommend obtaining an “additional insured endorsement” prior to a transfer to avoid losing coverage. Only a real estate attorney can properly advise you on any pitfalls that may arise by virtue of a transfer of your real property.