Identifying and Resolving Common Title Defect Issues in Florida
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Owning property is a major step in life, and part of the American Dream. Having marketable title to the property is vital to achieving this major step. There are many common title defects that can be avoided with proper due diligence. When real estate titles are defective, or unmarketable, the value is substantially diminished; that is, until the title issue is resolved. This post will discuss common title defect issues, and ways to resolve these issues.
Fraud and Forgery.
A forged deed is void, and does not affect the real landowner’s title to the property. A bona fide purchaser who takes title to land by a forged deed, without notice as to the forgery, is not protected by its recordation in the Public Records. The fact that a fraudulent deed has been recorded in the Public Records of the County does not afford notice of fraud itself. A landowner cannot be deprived of his land by a forged instrument, and the good faith reliance on the instrument by a bona fide purchaser is immaterial. Reliance on a fraudulent deed may bring loss upon the bona fide purchaser relying on it, but it cannot affect the true landowner. Wright v. Blocker, 198 So. 88 (Fla. 1940), 434-435.
This occurs when the grantor is misled to sign a deed, thinking that it is a different instrument; voiding the deed as if the grantor’s name had been forged by a third party. Id. at 91. However, if a grantor’s deed is obtained through a grantee’s fraudulent promise (i.e., with regard to consideration to be paid), it does not render the deed void against a bona fide purchaser, although it may be voidable against any party having notice of the fraud, including the grantee. Id. One of the only remedies for this type of title defect is reliance on adverse possession. § 95.231, Fla. Stat. (2013). Even this remedy, however, has its exceptions and limitations. Close attention to detail and diligence in reviewing closing documents can help prevent this potential defect.
Judgments and Liens.
While a lien can cloud title and potentially lead to foreclosure, it does not automatically give a possessory interest in the property. A judgment against a person, commonly from being in debt to a creditor, becomes a lien on real property when a certified copy of the judgment is recorded in the public records. § 55.10, Fla. Stat. (2013). While there are many different types of liens, they all have common characteristics and means of enforcement. Even if a document in the public records appears to place a lien on a property, it will not attach until three factors are met. The lien must: 1) be recognized by law; 2) be perfected according to the specific statutory requirements; and 3) not be expired. If any of these factors are not met than the lien does not attach to the property and title is not clouded or defective.
Mortgages, judgment liens and construction liens are just a few liens that can cloud a title if not released. A lien can be released when all involved parties reach an agreed upon amount, which can either be more or less than the face value of the lien. This is often dependent on the general economic climate, financial condition of the lien holder, amount of money available to clear the title, and the duration left of the lien. Often when a lien is satisfied at a real estate closing, the release is not recorded with the other closing documents. This is because the lienor will not release the lien in advance and will execute the release document only after being paid out of the closing proceeds. It is important that the closing agent follow through and make sure that the documents necessary to release all liens are recorded in the public records as part of the closing process. Unrecorded satisfactions and releases cause problems for subsequent title examiners.
Lastly, it is worth noting that title issues can still remain when dealing with property of a spouse. Judgment liens against one spouse, and only that spouse, do not attach to property owned by both spouses that is held as tenants by the entirety. Sharp v. Hamilton, 520 So. 2d 9, 10 (Fla. 1988). Whether enforcing the lien or owning the property subject to the lien, how the property is held is vital to obtaining or keeping good title. In addition, when dealing specifically with a mortgage lien on a homestead property, no valid lien exists unless the mortgage is signed by both spouses. Pitts v. Pastore, 561 So. 2d 297 (Fla. 2d DCA 1990).
Estate Issues and Breaks in the Chain of Title.
Probate issues can, and often lead, to a title defect issue. Depending on the age of the property in question there may be a break in the chain of title due to a lack of knowledge of the law or “do it yourself” documents applicable to that time. Fixing a title defect that results from missing heir or estate information can be as simple as recording a death certificate to opening a probate matter to clear the title. A careful reading and application of the Florida Probate Code, Chapters 731-735, Florida Statutes, will determine exactly how complicated resolving the defect will be. If the deed is missing marital status or homestead language, an affidavit from the grantor must be obtained and recorded with spousal joinder. Conversely, to avoid potential clouds on title, if a married person conveys non-homestead property the deed should contain a clause evidencing the property status as non-homestead.
Estate issues can often lead to breaks in the chain of title. A chain of title is exactly what it sounds like, the ownership history of a piece of land from its first owner to the current owner; therefore, a break in the chain of title is a gap in the ownership history. Currently, with the passage of the Marketable Record Title Act, Ch. 712, Florida Statutes, chains begin with a “root of title.” Ch. 712, Laws of Fla. This is most easily understood as a deed or court order that determines ownership of property that has been recorded in the county the property has been located in for more than thirty years. § 712.01(2), Fla. Stat. (2013). There are four common explanations for breaks in the chain: 1) missing documents; 2) name variations; 3) failure to include the proper parties on documents; and 4) wild deeds. There is no universal cure for these title defects, but they can be cured. Some by finding and recording the missing documents to complete the chain, others by executing and recording new documents, or sometimes these title defects require litigation to be resolved.
Foreclosure Issues and Mortgage Defects.
In light of economic downturn we have just worked through, mortgage foreclosures created many issues with chains of title. Chapter 702, Florida Statutes, governs how a mortgage may be foreclosed, but, more importantly, explains how to fix a title defect that results from a foreclosure. A mortgage foreclosure can be defective for a number of reasons, all of which result in the owner not being divested from the property. Ch. 702, Laws of Fla. Failing to file a lis pendens, failing to notify or serve all necessary parties, and failing to name every defendant that has an interest in the property are common ways to have the judgment set aside. When you are evaluating whether a foreclosure was effective, at a minimum, it is prudent to understand whether:
1. The property was properly described in all of the proceedings.
2. All necessary parties were named as defendants and proper service was obtained on
3. The foreclosure complaint was sufficient to state a cause of action.
4. The allegations showed by direct statements of fact that the interests of the defendants were subordinate to the lien of the Plaintiff.
Ultimately, if you find an outstanding interest or a grievous error in the foreclosure filings, you might have to reopen the foreclosure proceedings. Obtaining an amended judgment or an amended certificate of title is definitely within the realm of relief awardable.
One thing to note in foreclosures is the “safe harbor” provision. Florida Statutes provide a “safe harbor” for lenders against outstanding assessments owed to homeowner and condominium associations (See Chapters 720 and 718 respectively). For example, if the Plaintiff in a foreclosure action names the Association as a defendant, the recipient of the Certificate of Title is only responsible for assessments due one year previous to the issuance of the certificate of title (or 1% or the mortgage whichever is greater). If the Plaintiff did not name the Association as a defendant, the new owner may owe all of the delinquent assessments (subject to the governing documents of the Association).
An unsatisfied mortgage clouds title and can potentially lead to more serious issues. A mortgage is satisfied when a satisfaction, cancellation, or release of mortgage is recorded in the public records. § 701.04, Fla. Stat. (2013). Absent the recording of a satisfaction notice, and assuming the mortgage was assigned properly, the remaining unsatisfied mortgage continues to cloud the title. According to Section 701.02, Florida Statutes, an assignment of mortgage is not effective against creditors unless recorded and indicated in the title of the document. § 701.02, Fla. Stat. (2013). Possessing an improper or invalid assignment could result in loss of property rights.
Legal Description, Easement, Encroachment, Setback Issues.
A legal description is a means to distinguish a specific parcel from other parcels of land. Due to the specificity required in conveying property, any error in the description causes title problems. The type of recording system used in the legal description, lot and block description, section land description, or metes and bounds, determines how the title problem will be cured.
In lot and block descriptions, there may be typographical errors in the lot number, the block number, the plat book number, the page number, or the name of the plat. If the errors are relatively minor and the incorrect description does not describe a parcel of real property that actually exists, the error can be corrected by recording a scrivener’s affidavit explaining the typographical error and an affidavit from the official in charge of maintaining the official records for the county in which the property is located (either the clerk of the circuit court or the controller) that no such property as described in the erroneous deed exists. If the error is major or if it describes another parcel of land, a corrective deed is necessary. The corrective deed should reference the recording information for the erroneous deed, explain the nature of the error and include the correct legal description. If the erroneous deed describes another parcel of land, it puts a cloud on the title to the other parcel of land which must be corrected by a quit claim deed from the grantee in the erroneous deed to the record title owner of the other parcel. Similarly, if the error is contained in the legal description of a mortgage, a corrective mortgage must be recorded and the property described in error must be released from the lien of the mortgage.
Typographical errors in section land descriptions usually involve a missed or improper reference (for example, the “NE ¼” instead of the “NW ¼”) or an omitted reference. Because the section land description starts with a real piece of property and describes a portion of it, any erroneous description describes property that is owned by someone else. When correcting this type of error, you will need a corrective deed and a deed from the grantee in the incorrect deed to the record owner of the property that was described in the incorrect deed.
While conveyances of property require a very specific legal description, the same specificity is not required with conveyances of easements. If the location of the easement cannot be located because of imprecise wording of the deed, there is a cloud on the title. Hynes v. City of Lakeland, 451 So. 2d 505 (Fla. 2d DCA 1984). While “no particular form and language are necessary to create an easement” there must be words “clearly showing the intention of the parties to create a servitude on a sufficiently identifiable estate.” Fla. Jur 2d Easements § 17. The existence of an easement may not result in unmarketable or defective title, but title is nonetheless clouded.
While encroachments and setback violations might justify a purchaser from not performing under an agreement, no hard-and-fast rule has been established to determine whether buyer performance is relieved. Title is unmarketable if the encroachment is so substantial that it interferes with the use and enjoyment of the property, “but not where the encroachment is so minor that the damage is easily remunerable.” 44 Fla. Jur 2d Real Property Sales and Exchanges § 82. Setbacks, as distinguished from easements and encroachments, are found in local land development codes, statutes, and private covenants. See § 161.052, Fla. Stat. (2013). An owner who violates the setback can seek a variance from the governmental setback requirements. The variance may only be granted when an “exceptional and unique hardship” is present, that was not self created, and is not simply a “mere economic disadvantage.” Nance v. Town of Indialantic, 419 So. 2d 1041 (Fla. 1982); Josephson v. Autrey, 96 So. 2d 784 (Fla. 1957); Metropolitan Dade Cnty. v. Reineng Corp., 399 So. 2d 379 (Fla. 3d DCA 1981). Violation of a private covenant’s setback between two adjoining lots may justify an injunction requiring the removal of that portion of the building so encroaching. Daniel v. May, 143 So. 2d 536 (Fla. 2d DCA 1962). In sun, issues with the legal description, easements, encroachments, or setbacks can cloud title, but can be solved or even avoided with proper diligence and corrective remedy.
Rights of Third Parties.
Not only can title defects occur between the parties involved in the conveyance or lease, but rights of off-record third parties can also create significant title issues. This can occur with homestead properties, for example, when a single individual buys property and subsequently gets married. The marriage gives off-record rights to the spouse, and the property cannot be conveyed or encumbered without joinder from the spouse. This holds true not only for conveyances and encumbrances, but also when one spouse is attempting to convey the property to the couple, as married individuals. Art. X, § 4, Fla. Const.; Sigmund v. Elder, 631 So. 2d 329 (Fla. 1st DCA 1994).
Another issue can arise with unrecorded encumbrances and leases. Under Florida law, a buyer that takes title without knowledge of an unrecorded instrument is presumed not to have actual notice of that unrecorded instrument. With the presumption, the party claiming under the unrecorded instrument bears the burden to prove that actual knowledge existed. 44 Fla. Jur 2d Records and Recording Acts § 165.
Rest assured though, as both of these title issues are soluble. When title reflects one property owner, the marital status of the seller should be determined to know whether joinder of an off-record spouse is required. If this information is not sought out prior to executing the deed, the steps to resolving title defects when there is a break in the chain of title will resolve the issue. Solving the issue of an unrecorded lease is slightly more difficult and varies depending on the type of lease.
While these are only a few of the common title defects, with well-executed advice throughout the process of obtaining title these issues and others can be resolved. The headaches and issues that accompany defective title may make it temporarily undesirable, but rest assured that most of these issues are resolvable. The inconvenience and headaches are a small price to pay for living the American Dream and owning a home.
Source: Top 10 Title Defects Cured, Stanz, Mahoney and Deason