Title Insurance Overview
A title is the foundation of property ownership. Anyone who purchases real property also obtains a title to the land. 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 person paying the title insurance premium gets the first choice of closing/title agent. However, the lender must approve of the closing/title agent chosen. The buyer and seller should agree on the selected closing/title agent, but they may choose to do a split closing where the buyer uses one agency and the seller uses another. The money would be disbursed by the agency the lender approved.
Like other documents, you shouldn’t sign a Closing Disclosure Form, 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 the consumer wants to make any changes.
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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 more informed during the home buying process. RESPA is administered and enforced by the Consumer Financial Protection Bureau (CFPB). RESPA ensures 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. You may also email the CFPB Team with questions about the RESPA law at email@example.com.
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 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 entity that is not a title insurance agency, the matter would fall under the jurisdiction of the Florida Bar Association.
Please note, the investigation of any allegations of wrongdoing by an attorney would fall under the Florida Bar.
If you have issues related to mortgages or mortgage service providers, you may contact the Florida Office of Financial Regulation at 800-848-3792 or via their website at https://flofr.gov/ and CFPB’s Consumer Response Team at 855-411-2372 or via their website at https://www.ftc.gov/about-ftc/bureaus-offices/bureau-consumer-protection.
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.
Title insurance protects the buyer (policyholder) 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, environmental lien, notice of pending legal action, easement, restriction or burdensome covenant running with the land. A cloud on the title exists when there is reason to believe there could be a future claim against the title to the property. A lis pendens is one example of a notice that indicates a possible future claim against the title. A lis pendens is used to notify the public that someone is planning to file a lawsuit against the subject of the lis pendens.
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. The Lender’s policy 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 policyholder 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.
Unlike other types of insurance, you pay a one-time premium for your title policy. Take the insurance on your home for example, you pay an annual premium each year to keep coverage in force. With a title policy you pay the premium when you purchase the policy and the policy remains in effect for as long as you or any heirs own the property. 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 base premium rate of $575. No more. No less.
If a prior owner’s policy exists, reissue rates should be charged. The Reissue Rate for an owner’s policy, a leaseholder’s policy, or a lender’s policy 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 on the same insurer. The owner’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. Any amount of insurance for the lender over the owner’s coverage amount is calculated using the full premium rates as shown in 69O-186.003, Florida Administrative Code.
As a condition of doing business in Florida, title insurance companies are 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 and shown on the Closing Disclosure Form.
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 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/or a licensed title agency. A properly licensed title insurance agent may act as an escrow agent 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. The Closing Disclosure Form will show the amount of earnest money paid by the buyer. A title agent is one of four occupations permitted to hold escrow funds in Florida and who may conduct a closing when no title insurance is being issued. This is often referred to as a “Simple Escrow” transaction.
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. The court costs may be deducted from the escrowed funds if approved by the judge hearing the matter.
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 and seller will be required to pay as they would have paid at the closing had it been known.
Abstract of Title is a compilation of instruments dating back to earliest public records and includes physical copies of all recorded instruments affecting title to lands being searched. An alternative method involves searching the records for 30 years from the date of a valid root of title.
Clear Title is a title 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.
Cloud exists on the title when there is reason to believe there could be a future claim against the title to the property.
Closing Disclosure is a document that replaced other closing forms beginning August 1, 2015; specifically, the HUD-1, Good Faith Estimate (GFE) and the Truth in Lending Act (TILA) forms. This form will display the involved monetary amounts related to the closing.
Earnest Money is usually required from the buyer in order to show their sincerity in entering the contract to purchase property.
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.
Eminent Domain is the government’s constitutional right to take private property for public use and reimburse the record title holder for the reasonable cost of the land.
Lis Pendens is a formal notice of a pending law suit.
Primary Title Services should be recorded on the Closing Disclosure Form and include: evaluating 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.
Property Encroachment occurs when one person’s property extends onto the property of another. This can include fences, bushes, sheds, etc.
Related Title Services are commonly referred to as closing services and should be recorded on the Closing Disclosure Form. 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 and disbursing the funds from the closing.
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.
Simple Escrow is a closing in which no title insurance is issued.
Title Commitment is a binder for title insurance.
Title Defects are competing or adverse interests in the property’s ownership, usually found upon an evaluation of the documents from the title search.
Title Search is the compiling of title information from official or public records. The title search provides a summary listing of all the past documents affecting title to the land being purchased.
Writ of Interpleader is a court order that directs the escrow holder (a title agency, company, or attorney) how to disburse the escrowed funds in question.
Why is it taking so long to get my Deed?
The Deed is the actual document that transfers title from one person to another. The deed 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 is 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 companies don’t require the deed to be recorded prior to the issuance of the policy and will issue the title policy on the actual closing date. A deed will usually not be recorded until the prior mortgage is paid and the satisfaction is also ready to be filed in the county. Once the original deed is recorded and the title insurance policy is issued, the two documents are mailed to the new owner.
When purchasing a mobile home, ownership is evidenced by a title similar to an automobile title rather than a deed. 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 prior mortgage satisfaction being received and recorded along with the new property deed.
Is my title agent or agency licensed in Florida?
You may access the Licensee Search to verify an agent’s license status with the Florida Department of Financial Services, Division of Agent & Agency Services.
Is the title company licensed in Florida?
You may access the Company Search to verify a company’s license status with the Florida Office of Insurance Regulation.
My title agent was supposed to provide me a gift card for referring business to them.
Rule 69B-186-010(4), Florida Administrative Code, provides a complete list of unfair and/or deceptive acts as they pertain to title insurance agents and agencies. Here are a few items listed in the Florida Administrative Codes which title agents cannot do:
Provide or pay for food, drinks or room rentals at events designed to promote their business.
Pay advertising costs of real estate brokers, etc. for business referrals.
Sponsor and host any open houses for real estate brokers etc. for business referrals.
Provide or pay for gift cards or gift certificates for referral of business.
Provide or pay for cellular contracts for business referrals.
Offer any discount or reduction of any fee of the cost of an inspection, inspection report, appraisal or survey, including wind inspections, to a purchaser or prospective purchaser of title insurance.
For a complete list of prohibited activities, please review the Florida Administrative Code using the link provided above.
Keep a copy of your important documents in another location. In the event your home is totally destroyed, you would have copies of all of your important documents you may need to settle a claim with your insurance company. This may include a copy of the Closing Disclosure Form, title commitment, sales contract, escrow agreement, title insurance policy, all closing documents, etc. It is also good to keep a record of the title insurance agent and agency used for the sales transaction.