Buyer should get an Owner’s Policy
Dear Mr. Feichthaler:
My brother and I are in the process of purchasing a new build condo for cash and wondering if we need Owner’s Title Insurance. I believe it is optional in Florida. The builder is a national builder and the complex has already closed on 120 units of the 180 units planned.
It’s part of a larger home/golf community and my thought is that a title search at closing will be enough and that the risk of any issues is very small going forward.
— Robert D.
First, for our other readers, here is a brief summary of title searches and title insurance. Your condominium purchase will include your unit, as well as a share of the common areas and a portion of the actual structures. A title search is a must to determine if there are any liens against any portion of the property, title defects and restrictions. Unsatisfied mortgages and judgments are some of the items to be wary of.
In Lee County, it is customary for the new Owner’s Title Insur-ance Policy to be paid for by the seller. If this is the case for your contract, there is absolutely no reason to decline a policy. However, in some contracts (particularly in new condominium complexes), and in other jurisdictions like Collier County, the buyer pays for the policy. This title policy will protect you as the new owners from any title defect or encumbrance. As you note, the search should reveal issues that need to be cleared up before closing, as well as items that will impact title as long as you own the unit (the Declaration of Condominium being an example). Note my use of the word “should.” For example, let’s say the search did not reveal that a major subcontractor on your building has not been paid, and they have a lien worth millions against the entire project. If the search misses this item, and you purchase the property, the entire value of your unit has the potential to secure that debt.
Declining a title insurance policy is a risk I never take when purchasing property, whether vacant land, homes or condominium units. The cost of the policy is typically about 1/2 percent of the purchase price, and is only a one-time cost that will insure the property for as many years as you own it.
So, although your conclusion that there is a small risk of loss going forward is correct, the potential dollar loss if something goes wrong is great. I would absolutely demand an Owner’s Policy, and at the seller’s expense before signing the contract.
Eric P. Feichthaler has lived in Cape Coral for over 33 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator.
Mr. Feichthaler can be reached at firstname.lastname@example.org, or (239) 542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.