Chapter 119.011 (12) identifies public records as “all documents, papers, letters, maps, books, tapes, photographs, films, sound recordings, data processing software, or other material, regardless of the physical form, characteristics, or means of transmission, made or received pursuant to law or ordinance or in connection with the transaction of official business by any agency.”
State laws require the recording of all documents that affect rights and interests in real estate in the public real estate records of the county where the property is located. These public records, or title records, contain a history of every parcel of real estate in the county, including names of previous owners, liens, easements, and other encumbrances that have been recorded.
Deeds, mortgages, liens, easements, and sale contracts are among the documents that must be recorded. Other public records that affect real estate title are marriage, probate, and tax records.
Generally, a County Recorder’s Office or other similarly named office maintains the title records.
Title records serve a number of purposes, not the least of which is to avoid ownership disputes. Other important purposes are:
- public notice
Title records protect the public by giving all concerned parties constructive notice of the condition of a property’s legal title: who owns the property, who maintains claims and encumbrances against the property.
- buyer protection
Title records protect the buyer by revealing whether a property has marketable title, one free of undesirable encumbrances. The buyer is legally responsible for knowing the condition of title, since it is a matter of public record. Recording a transaction also protects a buyer by replacing the deed as evidence of ownership.
- lienholder protection
Title records protect the lienholder by putting the public on notice that the lien exists, and that it may be the basis for a foreclosure action. Recording also establishes the lien’s priority.
Marketable title. Since the value of a property is only as good as the marketability of its title, the evidence supporting the status of title is a significant issue. To demonstrate marketable title to a buyer, a seller must show that the title is free of
- doubts about the identity of the current owner
- defects, such as an erroneous legal description
- claims that could affect value
- undisclosed or unacceptable encumbrances
The four principal forms of evidence the owner can use to support these assurances are:
- a Torrens certificate (not applicable to Florida)
- a title insurance policy
- an attorney’s opinion of the title abstract
- a title certificate
Title certificate. A title certificate is a summary of the condition of title as of the date of the certificate, based on a search of public records by an abstractor or title analyst. The certificate does not guarantee clear title against defects, unrecorded encumbrances or encroachments.
A title company performs a title search to determine if the title to a particular property is legitimate. The company will examine property records to assure that the person claiming to own the property really does legally own it. The company looks for anyone else who could claim full or partial ownership of the property. It looks for unrecorded breaks in the chain of title. It also searches for outstanding mortgages, liens, judgments, unpaid taxes, restrictions, easements, leases, or any other issues that may affect the property’s ownership. Sometimes, title companies require a property survey to be performed. The company may prepare a report on what it found, known as an abstract of title, and then provide a title opinion letter regarding the validity of the title.
Title companies may maintain an escrow account related to the property transfer, handle the transaction closing, and file the new title after closing. The title company may also issue title insurance policies but would complete the search before issuing a policy. If the search fails to discover any uninsurable defects, the company issues a binder, or commitment to insure. The binder recapitulates the property description, interest to be insured, names of insured parties, and exceptions to coverage.
Chain of title
Chain of title refers to the succession of property owners of record dating back to the original grant of title from the state to a private party. If there is a missing link in the chronology of owners, or if there was a defective conveyance, the chain is said to be broken, resulting in a clouded title to the property. To remove the cloud, an owner may need to initiate a suit to quiet title, which clears the title record of any unrecorded claims.
An abstract of title is a written, chronological summary of the property’s title records and other public records affecting rights and interests in the property. It includes the property’s chain of title and all current recorded liens and encumbrances, by date of filing. A title abstractor or title company analyst conducts the title search of public records needed to produce an abstract. Insurers and lenders generally require the search to identify title defects and ascertain the current status of encumbrances.
Attorney’s opinion of abstract. An attorney’s opinion of abstract states that the attorney has examined a title abstract, and gives the attorney’s opinion of the condition and marketability of the title. Generally, an opinion is not a proof or guarantee of clear title. Further, it offers no protection in the event title turns out to be defective.
A title insurance policy is commonly accepted as the best evidence of marketable title. A title insurance policy indemnifies the policy holder against losses arising from defects in the insured title. Unlike other types of insurance that are based on problems that may happen in the future, title insurance is based on loss prevention by stopping title problems from happening.
Owner’s policy. An owner’s policy is issued for the property’s initial or appreciated value and protects the buyer from unexpected or unknown defects with the title. It is paid in one premium payment. An owner’s policy may have standard coverage or extended coverage. Standard coverage protects against title defects such as incompetent grantors, invalid deeds, fraudulent transaction documents, and defects in the chain of title. Extended coverage protects against liabilities that may not be of public record, including fraud, unrecorded ownership claims, unintentional recording errors, and unrecorded liens. Extended coverage may also protect against adverse possessors, boundary disputes, and prescriptive easements. Neither standard nor extended coverage insures against defects expressly excluded by the policy or defects that the owner might have been aware of but did not disclose. This policy is not transferrable.
The American Land Title Association (ALTA) is the standardized title insurance policy used in Florida. Information on both types of policies as well as a sample owner’s policy, including conditions and exclusions, can be found at www.homeclosing101.org.
Lender’s policy. A lender’s policy is issued for the financed balance of the mortgage loan and protects the lender from title defects. If a property sells for $100,000, and the buyer pays $20,000 as a down payment, the balance of the purchase price, or $80,000, will be financed. Thus, a lender who holds an $80,000 mortgage on a property will obtain protection worth $80,000 against the possibility that the lender’s lien cannot be enforced. The premium is a one-time payment, and the policy is transferrable to another lender if the loan is sold.