Florida Commercial Law

Does a Bank have Continuous Coverage under a Mortgagee Title Policy after a Foreclosure?

By Zana Holley Dupee

Many banks are foreclosing on homes or taking ownership of them by a deed in lieu of foreclosure.  One question that has come up is whether the bank has continuous coverage under the Mortgagee Title Insurance Policy from when the mortgage was originated.  This can be important if title problems are discovered after the bank has already taken title to the property.

Paragraph 2(a) of the 1992 ALTA mortgagee policy Conditions and Stipulations states in part:

2. CONTINUTION OF INSURANCE

    (a) After Acquisition of Title.  THe coverage of this policy shall continue in force as of Date of Policy in favor of

    (i) an insured who acquires all or any part of the estate or interest in the land by foreclosure, trustee's sale, conveyance in lieu of foreclosure, or other legal matter which discharges the lien of the insured mortgage; (ii) a transferee of the estate or interest so acquired from an insured corporation, provided the transferee is the parent or wholly owned subsidiary of the insured corporation, and their corporate successors by operation of law and not by purchase ...

The policy language above does tell us that the bank may continued to be insured.  However, there are a few problems that arise: 

One problem is when a bank has a 3rd party bid at the foreclosure sale.  This often happens when the bank's parent or subsidiary company bids at the sale without having an assignment of the mortgage.  If this happens, the property has been acquired by a 3rd party, not the mortgage holder, and the title policy terminates.  So, there is no continued title coverage!!

Another problem is the amount of damages that are available under a mortgagee title policy.  The amount payable under a mortgagee policy is limited to the amount of indebtedness as compared to the value of the property.  So, if the title defect does not diminish the property's value below the amount of principal owed on the mortgage, then there is no payable insurance claim on a mortgagee policy.  In contrast, an owner's policy would pay for the decrease in the value of the property without regard to the balance owed on the mortgage.  This makes a big difference in cases where the mortgage balance has been paid down or where the lender did not loan the full value of the property.

An additional problem that arises is the effective date of the policy.  The effective date of the mortgagee policy is the date that the mortgage was originally recorded.  So, any title defects that arose after that date will not be covered by the existing mortgagee policy.

For all these reasons, banks should consider purchasing an owner's policy when they buy a property at a foreclosure sale rather than relying on continued coverage for title defects under the mortgagee policy. 

If you are a lender in North or Central Florida that needs legal advice regarding real estate issues, please contact Zana Dupee to schedule a consultation.  Zana has significant experience in representing lenders who own properties with title defects, and we would be happy to assist your bank as well.  Often, our fees for fixing title defects are paid from a title policy claim.  If you need assistance with real estate, probate or trust litigation, you can call Zana Holley Dupee to schedule a consultation at (352) 379-5900.

Is the Tenant required to Pay Rent into the Court Registry?

by Zana Dupee, Esq.

In a residential eviction case, if the tenant claims that the Landlord's 3-day notice was defective or non-existent, does the tenant have to pay the undisputed rent into the court registry as set forth in Florida Statute 83.60(2)?  Some might argue that since the notice is required before the Landlord can even file the suit, then the tenent could raise a defective notice as a defense without triggering the statutory requirement to pay the rent into the court registry.  This issue was litigated quite a bit recently and the appeals court ruled that the tenant DOES have to pay the rent before they can raise the defense of defective or non-existent 3-day notice. 

The statute states:

In an action by the landlord for possession of a dwelling unit, if the tenant interposes any defense other than payment, the tenant shall pay into the registry of the court the accrued rent as alleged in the complaint or as determined by the court and the rent which accrues during the pendency of the proceeding, when due. The clerk shall notify the tenant of such requirement in the summons. Failure of the tenant to pay the rent into the registry of the court or to file a motion to determine the amount of rent to be paid into the registry within 5 days, excluding Saturdays, Sundays, and legal holidays, after the date of service of process constitutes an absolute waiver of the tenant’s defenses other than payment, and the landlord is entitled to an immediate default judgment for removal of the tenant with a writ of possession to issue without further notice or hearing thereon. In the event a motion to determine rent is filed, documentation in support of the allegation that the rent as alleged in the complaint is in error is required. Public housing tenants or tenants receiving rent subsidies shall be required to deposit only that portion of the full rent for which the tenant is responsible pursuant to federal, state, or local program in which they are participating. Fla. Stat. 83.60 (2).

The court noted the strong and plain language of the statute requiring a tenant to pay rent in the registry of the court if the tenant raises any defense other than payment.  The court also stated that if the tenant does not pay the rent to the court registry, then the tenant has absolutely waived his defenses and the landlord is entitled to an immediate default judgment.

If you are a Landlord in North Florida who needs legal assistance, or if you need assistance with real estate, probate or trust litigation, you can call Zana Holley Dupee to schedule a consultation at (352) 379-5900.

Preparing a Contract for Making an Offer to Buy Real Estate in Florida

By Zana Dupee

     To be a valid contract under the Statute of Frauds, a written document only needs to have the essential elements of the contract. Nonetheless, a contract for the sale of real property has not been prepared properly unless the written memorandum includes all terms and agreements necessary to allow the transaction to close without dispute. No sale of real property is a simple transaction; any contract for the sale of real property must be thorough and comprehensive.

     Because even the simple real property sale is complex, Realtors use form contracts to ensure that all necessary matters are included in the contract. In fact, the use of forms is highly recommended by lawyers to avoid omission of important matters. The form contract may be a printed form but is often a form developed by the lawyer and revised from time to time.

     Florida Realtors and attorneys use many different printed forms of the contract for the sale of real property in Florida. Several local bar associations or local realtor associations publish forms for use in their areas. These forms include terms and provisions that are customary in the local area.

 The contract forms most widely used in Florida are

1. The FAR/BAR Contract (published and copyrighted by the Florida Association of Realtors and The Florida Bar), and
2. The FAR Contract (copyrighted and published by the Florida Association of Realtors).

      The FAR/BAR Contract has a long history. In 1973, The Florida Bar and the Florida Association of Realtors signed an agreement known as the Florida Realtor/Attorney Accord. They subsequently replaced this agreement subsequently with an agreement known as the Memorandum of Cooperation. Under the terms of the Florida Realtor/Attorney Accord and the Memorandum of Cooperation, the statewide Realtor/Attorney Joint Committee was established. This committee is composed of members of the Florida Association of Realtors and members of The Florida Bar. The Committee established a subcommittee to draft and continually revise the FAR/BAR Contract.

     The subcommittee published the original version of the contract in the early 1970s. The subcommittee has revised it every two or so years since.  The Board of Directors of The Florida Association of Realtors, the Executive Council of the Real Property, Probate and Trust Law Section of The Florida Bar, and the Board of Governors of The Florida Bar must approve each revision to the contract proposed by the subcommittee. Therefore, the FAR/BAR Contract represents the work product and thinking of many experienced real property lawyers and realtors.

     The legal staff of the Florida Association of Realtors prepared the FAR Contract with no input from the attorneys who are members of the statewide Realtors/Attorney Joint Committee, the Executive Council of the Real Property, Probate and Trust Section of The Florida Bar, or the Board of Governors of the Florida Bar.

     Although no form contract is suited for all transactions and the drafters of these contract forms intended for Realtors to use them primarily for ordinary residential transactions, lawyers can use the provisions of the contracts as general models for many of the important terms to be included in any contract for the sale of real property. 

     Even though your Realtor may be using a form contract, you will best protect yourself if you consult with a real estate attorney to review the prepared contract before you sign it.  If you are considering making an offer to purchase real estate in Florida, or if you need assistance with real estate, probate or trust litigation, you can call Zana Holley Dupee to schedule a consultation at (352) 379-5900.