Tuesday, September 4, 2012

Outcome In Recent Florida Appeals Court Case Underscores Importance Of Obtaining Title Insurance When Buying (Or Lending Against) Real Estate

A recent news release from the law firm Trenam Kemker comments on a recent ruling by a Florida appeals court (Mayfield v. First City Bank of Florida, Case No. 1D11-3681 (Fla. 1st DCA, August 2, 2012)) that essentially said that a deed recorded for only 73 minutes before being 'erased' by the office of the local county recording office was enough to impart constructive notice to the public as to the ownership and lien status of a particular piece of real estate, notwithstanding the fact that anyone checking the public record after the erasure would never know of the documents' existence.

The news release makes the following three points that underscore the importance of a buyer obtaining a title insurance policy when buying real estate, thereby placing a title insurance company on the hook for a possible loss on account of a local county recorder's office screw-up:
  1. The Mayfields’ loss is exactly the kind of result that title insurance is designed to cover. Along with the risks of forgery, fraud, and other problems not disclosed by the public records, the title insurance company assumes the risk that a recording clerk will make a mistake in recording your documents, leaving the priority of your transaction unprotected. Don’t forego title insurance because you think you have a simple or routine transaction — such was the Mayfields’ transaction.

  2. Make sure that your title insurance commitment is marked or endorsed at closing to insure that your ownership is insured through the date and time of the closing. Thankfully, Florida has a statute that effectively requires the title insurance company to provide coverage as of this date if it is disbursing funds in connection with closing a transaction, but most real estate lawyers require the update notation or endorsement anyway.

  3. As a double check on the title insurance company, learn to use the online Official Records of the local clerk of circuit court, which, within a few days of closing in most counties, will enable you to see your recorded documents online in the county Official Records over the internet. In view of the Mayfield case, it may be a good idea to check the records again a few days or weeks later, to be sure that the recording hasn’t been cancelled. No kidding.

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