Understanding the Title Commitment

Residential lender concept

In a real estate transaction, it is important to ensure that all of the appropriate steps are taken in order to give the buyer of the property marketable title at closing.  Part of this process is ordering a title commitment from a title insurer.  A title commitment is the title insurer’s promise that it will issue title insurance for the property after closing if certain conditions are met and subject to certain exceptions.

When a title commitment is received per the timing requirements of the purchase contract, it should not be ignored.  There may be requirements listed on the title commitment to which the buyer needs to provide objection within a specific timeframe.  Pursuant to the standard FAR/BAR contract, the buyer has only 5 days after receipt of the title commitment to object to any issues that render title unmarketable.  If the buyer does not timely object, they may forever lose their ability to do so.

How does the buyer know what objections to make?  Only a licensed attorney is qualified to review and provide a legal analysis of a title commitment, and most importantly, the documents constituting exceptions to title.  Therefore, it is important to use the services of an experienced real estate attorney to review your title commitment and determine what items require objections.  Additionally, your real estate attorney will be able to address and eliminate certain exceptions to your title policy.  An exception to a policy is an item that is excluded from coverage.  Certain exceptions can be eliminated by taking steps such as executing an affidavit or getting a boundary survey.  If an exception can be removed, it is in the buyer’s best interest to do so as it ensures the most protection for the buyer’s title insurance policy.

If you have any questions about title commitments or title policies, we urge you to contact a real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jessica Stewart, Esq. jstewart@berlinpatten.com

Please note that we have relocated from our former downtown Sarasota office to our new Sarasota headquarters as of Monday, August 17th which is located at 3700 South Tamiami Trail just across from South Gate Mall. This will only impact business handled from our Sarasota location, as our Venice and Lakewood Ranch offices will remain the same. Thank you.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992

VENICE

247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Impact of Tropical Weather Systems on Insurance

Storm ahead road sign

The 5th Tropical System for the 2015 Season (which generally runs from June 1 to November 30) has been identified by the National Weather Service. Tropical Storm “Erika” is now in the Caribbean and bearing down on Florida.

Since Binding Authority for windstorm, homeowners or flood insurance coverage may be temporarily suspended when a “Tropical Depression,” “Tropical Storm,” or “Hurricane” is located anywhere in the State of Florida, buyers, agents and settlement agents need to be mindful that insurance coverage needs to be bound and in place before closing. Lenders will not close on a mortgage loan without appropriate insurance coverage.

If you have a closing pending your buyer needs to be absolutely certain that their insurance is binding (sometimes referred to as “bound”).”Binding” means that coverage is in place, although a policy has yet to be issued.  Often binding takes place through verbal agreement, in person, via email, or over the telephone; however, many times coverage will not be bound until payment is tendered. Confirmation from your insurance agent needs to be obtained before binding authority is suspended; otherwise, insurance coverage will not be available until the tropical system has passed and the suspension lifted.

The Florida Realtors/Florida BAR-3 Contract, Paragraph 5(b), EXTENSION OF CLOSING DATE, provides:

If extreme weather or other condition or event constituting “Force Majeure” (see          STANDARD G) causes: (i) disruption of utilities or together services essential for Closing, or (ii) Hazard, Wind, Flood or Homeowners’ insurance, to become unavailable prior to Closing, Closing shall be extended a reasonable time up to 3 days after restoration of utilities and other services essential to Closing and availability of applicable Hazard, Wind, Flood or Homeowners’ insurance. If restoration of such utilities or services and availability of insurance has not occurred within ___ (if left blank, then 14) days after Closing Date, then either party may terminate this Contract by delivering written notice to the other party, and Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.

The Florida Association of REALTORS – CRSP-13 Contract, Paragraph 4, Closing Date, in pertinent part provides:

If on Closing Date insurance underwriting is suspended, Buyer may postpone Closing for up to 5 days after the insurance suspension is lifted.

If your transaction originates out of contract other than the Florida Realtors/Florida BAR-3 Contract, or the Florida Association of REALTORS – CRSP-13 Contract, be sure to closely review the specific provisions of that contract regarding an extension of the Closing Date as a consequence of the suspension of insurance underwriting arising out of a tropical system.

As always, should you have any questions regarding the foregoing we urge you to consult with your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Mark C. Hanewich  mhanewich@berlinpatten.com

Please note that we have relocated from our former downtown Sarasota office to our new Sarasota headquarters as of Monday, August 17th which is located at 3700 South Tamiami Trail just across from South Gate Mall. This will only impact business handled from our Sarasota location, as our Venice and Lakewood Ranch offices will remain the same. Thank you.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992

VENICE

247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Propane Gas – What’s the Big Stink?!

Professional kitchen detail, knob
Over the last few weeks there have been numerous requests by Sellers to obtain a prorated credit for unused gas remaining in their propane tanks.  In these instances the Sellers thought Standard K (“Proration’s; Credits”) of the Standard FRBAR-2 Contract addressed this issue.  Standard K specifically requires the following recurring items to be made current and prorated as of the day prior to Closing Date: real estate taxes, interest, bonds, association fees, insurance, rents and other expenses of Property.  The Sellers argued that the propane gas was an “other expense of Property” and therefore should be prorated on the HUD-1.  However the Sellers acknowledged (and actually agreed) that the same argument could be made that the use and payment of propane gas is similar in nature to a cable or utility bill which are not prorated at closing.  It is clear that the phrase “other expenses of Property” is not clearly defined and ambiguous.  To avoid having to deal with this ambiguity moving forward we would suggest that you should:
  1. Ask the Seller if they have an existing gas propane tank that they use.
  2. Ask if the gas propane tank is leased or owned.
  3. Ask the Seller to provide a copy of the last invoice to fill the propane tank.
  4. Ask the Seller to find out how much it would cost for the propane company to inspect the tank a few days before closing (most propane gas company’s charge a service fee ranging from $65-$100).
  5. Consider the following methods for determining credits:

a.   Have your attorney add language to the Contract (specifically under additional terms) that addresses the service fee (i.e., who pays) as well as a credit to the Seller for any unused propane gas.   The credit should be determined by multiplying the percentage of propane gas remaining multiplied by the last invoice.

Example:

$1,000 – reflects the amount of the last invoice to fill the entire tank

X  20% – propane gas remaining

= $200 – equals the credit due to the Seller

b.   As an alternative to 5(a) above, the parties could add language that the Seller will provide a full tank of propane at closing and a credit will be issued for the going rate of propane for the full tank.  Example, the tank is 200 gallons and the price per gallon is $3.00, so the credit would be $600.00 to the Seller.

As always, should you have any questions regarding the foregoing, we urge you to consult with your local real estate attorney.
Sincerely,
Berlin Patten Ebling, PLLC
Article Authored by Jamie Ebling, Esq.  jebling@berlinpatten.com
Please note that we have relocated from our former downtown Sarasota office to our new Sarasota headquarters as of Monday, August 17th which is located at 3700 South Tamiami Trail just across from South Gate Mall. This will only impact business handled from our Sarasota location, as our Venice and Lakewood Ranch offices will remain the same. Thank you.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.
 
 
SARASOTA
3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992
 
VENICE
247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992
 
LAKEWOOD RANCH
8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

What Do You Mean You Are Terminating the Contract a Week Before Closing?!

In the Sarasota real estate market, the two most widely used real estate contract forms are the FR/BAR-3 Contract commonly referred to as the “Regular Contract” and the FR/BAR As Is Contract.  Under the As Is Contract, the buyer has an absolute out within the inspection period thus many Realtors prefer the Regular Contract.  In fact, under the As Is Contract, a buyer doesn’t even have to spend money on an inspection to be able to terminate the contract.  However, there is one sentence that Realtors should be aware of when using the Regular Contract.  The following sentence is in Paragraph 12(b) giving the parties the right to terminate the contract all the way up to closing if timely notice is not given:

“If neither party delivers such written notice to the other, then either party may terminate this Contract and Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.”

Let’s take the following fact pattern using the Regular Contract.  The General Repair Limit under Paragraph 9(i) is listed as Zero.  Within the inspection period, buyer has a home inspection completed and delivers notice to the seller of numerous repair items that need to be addressed.  In accordance with the contract, seller obtains and delivers to the buyer the repair estimates totaling only $500.  Buyer is pleased with the inspection results and wishes to proceed with closing.  However, buyer fails to notify the seller within 5 days of buyer’s receipt of the estimates agreeing to accept the property in as is condition.  Mr. Moneybags contacts the seller and makes him an offer he can’t refuse.  Consequently, a week before closing, the buyer receives written notice from the seller that seller is terminating the contract under Paragraph 12(b).  Although buyer gets his deposit back, buyer is not happy that he just lost the property to Mr. Moneybags.

A similar sentence is found in the Wood Destroying Organism (“WDO”) Paragraph 12(c) but it reads if buyer does not deliver such written notice to seller, then either party may terminate.  For instance, buyer has a WDO inspection and there is evidence of live termite infestation.  The WDO Limit is $500.  Buyer delivers the WDO report to the seller within the inspection period.  Seller, within 10 days from receipt of the WDO report, obtains and delivers to buyer estimates totaling $600.  Weeks go by with no response from the buyer and then a week prior to closing, buyer notifies seller that buyer is terminating the contract under Paragraph 12(c).  Here, seller isn’t happy since buyer gets the Deposit back and the contract is terminated.

In summary, if the inspection items exceed the respective limits under Paragraph 9 of the Regular Contract, then make sure the parties give proper notice to the other party and don’t remain silent.  Likewise, it is important when the parties do reach an agreement concerning the inspection items to reduce it to writing by an addendum to the contract.  If the party is represented by an attorney, it is always a good idea to reach out to the attorney to prepare the addendum which is just one of the many benefits when using an attorney as the closing agent versus a title company.  As always, if you have any questions concerning the foregoing, we urge you to consult with your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Julie Horstkamp, Esq. jhorstkamp@berlinpatten.com

Please note that we will be relocating from our current downtown Sarasota office to our new Sarasota headquarters as of Monday, August 17th which is located at 3700 South Tamiami Trail just across from South Gate Mall. This will only impact business handled from our Sarasota location, as our Venice and Lakewood Ranch offices will remain the same. Thank you.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

3700 South Tamiami Trail, Suite 200, Sarasota, FL 34239   P (941) 954-9991  F (941) 954-9992 

VENICE

247 Tamiami Trail South, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992 

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Buyer Default on a Residential Transaction

Last week, we blogged about the consequences and legal options available when a seller defaults on a residential contract in Florida. But what happens when the buyer defaults? What recourse is available to the seller, and how can a buyer protect themselves from inadvertently defaulting on a contract?

One of the key issues for both parties is which contract the parties sign.  For most sellers, a standard contract for residential purchase is ideal, because it provides very limited reasons for a buyer to cancel the contract. Many buyers, however, may prefer to sign the FAR/BAR As Is contract. The As Is contract provides a limited time for the buyer to conduct inspections, during which the buyer can cancel the contract for any reason, even if simply due to a change of mind.  After the inspection period buyers that cancel are faced with losing the deposit or the seller filing a lawsuit for damages or specific performance.

Which, brings us to the next key factor in protecting a party from buyer default.  The default provision of the contract lists the parties’ respective remedies in the event of default, and may provide for mandatory mediation or arbitration to resolve a dispute prior to litigation.

First, many default provisions provide that in the event of buyer default, the seller may elect to claim the security deposit in full settlement of all claims arising from the default.  This is often the remedy sellers elect, but may not be enough to fully compensate the seller for his damages.  Moreover, a dispute over a deposit will ultimately result in a lawsuit in which the escrow agent is paid its attorney fees before any of the deposit funds are awarded to the parties.  The unfortunate result is that, in many occasions, the winning party is left with little or no recovery because all or most of the deposit was paid to the escrow agent’s attorney. Sellers can usually also elect the option to file for specific performance, but that is very rarely a successful claim in Florida.

In any contract for the purchase of real estate, a seller is best protected by making sure that the seller can elect to sue the buyer for all damages incurred due to the buyer’s default.  Conversely, buyers are best protected by limiting the seller’s remedies to retaining the security deposit in full settlement of all damages, and include a small security deposit amount in the contract.

As to mandatory mediation or arbitration clauses, mediation is often a cost-effective way to settle a dispute.  However, mandatory arbitration clauses can prove to be cumbersome, expensive and not in the best interest of a party.  Arbitration requires significant filing fees (far more than filing a lawsuit in most cases), is time consuming and expensive, with the parties paying both their attorneys and the mediator, and the decision can not be appealed except in extreme cases. Therefore, I usually recommend parties to agree to a mediation provision but to steer clear of mandatory arbitration clauses.

Therefore, we highly recommend that any party entering into a contract for the sale and purchase of real estate to contact a real estate attorney to review and provide advice on the contract’s terms before signing. Should you have any questions regarding the foregoing, we urge you to consult with your local real estate attorney.

Sincerely,
Berlin Patten Ebling, PLLC
Article Authored by Michelle Champion, Esq. mchampion@berlinpatten.com
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.
 
 
SARASOTA
1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992
 
VENICE
247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992
LAKEWOOD RANCH
8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Seller Default on a Residential Transaction

While it may not happen often, we have recently experienced an increase in the number of sellers attempting to “walk” from the transaction.  In this instance, the buyer is often left in a difficult position and wondering what remedies they may have against the seller, if any.  Fortunately, the answer is set-forth in most contracts and it is certainly set-forth in both the “Standard” and “AS-IS” FAR-BAR contracts, which are the contract forms used most often in Southwest Florida.  These contracts outline what remedies a buyer may have in the event of a default by the seller.

So when is a seller determined to be in default under the contract?  The most obvious answer is when a seller simply refuses to sign the closing documents or flat out tells the buyer that they (the sellers) are canceling the transaction.  What many people don’t realize is that a seller is considered to be in default if the seller “fails, neglects, or refuses to perform seller’s obligations under the contract…”  Examples of a seller default include: (1) not allowing access to the Property for inspections; (2) not providing disclosure documents to the buyer as required by Florida law; and (3) refusing to execute the closing documents at closing.

Now that we have determined that the seller is in default, what can a buyer do?  The buyer has a few options once it is determined that the seller is in default.  The most common remedy is for the buyer to request the return of their deposit and walk away from the transaction.  While this is certainly the path of the least resistance, it is not always an adequate remedy for a buyer who has spent a great deal of time and money prior to the seller default.  At this point, the buyer may consider pursuing litigation.  Pursuant to the terms of the contract, the buyer may elect to receive a return of the buyer’s deposit without thereby waiving any action for damages resulting from the seller’s breach, may seek to recover damages, and/or seek specific performance.  In pursuing a damages and/or specific performance suit against a seller it is important to have a well-documented history of the file, as these cases often come down to questions of fact.  An experienced real estate attorney can assist you in preparing and documenting the file throughout the transaction, which is yet another reason to engage a real estate attorney early on in the closing process.

It is important to note that seeking damages and/or specific performance can be very costly remedies for a buyer upfront. However, it is also important to note that most contracts (including the FAR-BAR contracts) contain a prevailing party attorney fees provision, which means that the non-prevailing party will be responsible for paying the prevailing parties’ costs, fees and reasonable attorney fees.  While litigation is never an appealing option, there are times when the parties to a transaction are left with no other alternative.  In those cases, it is imperative to seek the guidance of qualified legal counsel.

As always, we recommend that you seek the counsel of an experienced real estate professional when dealing with a potential default of a residential transaction.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by William McComb, Esq. wmccomb@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Understanding the Importance of an Open Permit Search

Why is it important to request an open permit search whenever one buys real property?  The answer to that question involves an understanding of the permit process. When one performs improvements to property, in most cases, a permit for that work is required. The permit, in essence, provides the legal authority to proceed with the work in accordance with the plans or specifications provided to the applicable governmental authority. The permit then goes through different phases, generally as follows:

  1. Open Permit. Once a permit is initially pulled for work, it is considered open until the work is completed.  It remains Open until the work has been completed AND inspected.
  2. Closed Permit.  A permit is Closed once the work has been completed, and most importantly, such work has been inspected by the appropriate governmental authorities to verify that it was done properly and meets all applicable code requirements.
  3. Expired Permit. If work was originally permitted, but never closed properly, the permit may expire. An expired permit means that work may or may not have been done, and that such work, if performed, was not properly inspected to allow the permit to be closed.

(Note that jurisdictions may use different terminology, but generally speaking, these are the three general permit statuses)

It is critically important to request a permit search for two fundamental reasons.  First, the buyer wants to make sure that all prior work on the property, if any, was done properly, and that all permits for that work were properly closed, thus providing confirmation that the work was indeed inspected and blessed by the applicable governmental regulatory body.  Second, if you know that work was done to the property, a permit search will confirm whether the work was indeed properly permitted. In Southwest Florida, there is example after example of illegal work, i.e., work that was done without a permit. This is a large and potentially expensive problem, one that a buyer would want to discover before closing  (rather than when the buyer tries to sell the property down the road).

If open permits are discovered, a buyer should insist that they get closed prior to closing.  This generally involves calling in a government inspection of the improvements, but could involve very costly remedial measures to place the work in compliance with the permit to properly close it out. And if you know that work was performed, but cannot locate a permit for it, chances are, the work was done illegally. In such instances, you should insist that the seller produce proper permits for the work, if they can.  This generally involves applying for what is referred to an after-the-fact permit. This can be VERY expensive and time consuming to obtain, and could require substantial renovations or even total removal of the illegal improvements.  This is not something to be taken lightly.

Insist on an open permit search when you are buying property, and of course always contact your real estate attorney if you have any questions about permits or illegal improvements.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Evan Berlin, Esq. eberlin@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024