The purchase of your home may be the single largest investment that you will make in your lifetime.   At closing, you are given a deed to your home and you think – “Great, I own it.   As long as I pay my mortgage, taxes, contractors, and homeowner’s dues, no one can take it away from me.”   For the most part (at least in Florida), that is true.  But what do you do if someone does try to take your home away from you, claiming that you do not hold good title to the property?

The answer is to make a claim on your owner’s title insurance policy.   At closing, you will have (or at least should have) purchased an owner’s policy of title insurance that insures that you have “good title” to the home.  Depending on the policy terms, an owner’s title insurance policy may insure against all kinds of potential title problems, including:

• Title to the home being vested in someone else.   For example, suppose you buy your home from Sally Seller, who claims to be unmarried.   Several years go by, and at some point, you decide to either sell the home, or perhaps refinance your mortgage.  It is not until that time that you learn that Sally Seller lied at closing –  in truth, she was not unmarried and in fact legally owned the home with her husband, Sam Seller.  Since Sam didn’t sign the deed to you, he now claims he has an ownership interest in your home.    Your owner’s policy of title insurance may offer you coverage for this title problem.
• A defect, lien or encumbrance on your property.   Let’s go back to Sam and Sally Seller.   Suppose Sam and Sally Seller own the home encumbered by a mortgage from Big Bank.  You agree to buy the home, and you incur a purchase-money loan, secured by a mortgage, from Community Bank.  If all goes well, at the closing table, some of the funds from your loan from Community Bank will pay off the Sam and Sally Seller’s loan from Big Bank, and Big Bank will release its mortgage against your home.   Usually, this occurs.  But what if Big Bank (because it is so big) makes a mistake and applies the money paid at your closing to a different loan on a different property.   That leaves Big Bank’s mortgage still on your property.   The Sellers, thinking that their mortgage is satisfied, stop making their monthly mortgage payments to Big Bank.  Big Bank then files to foreclose its mortgage on your home!   Your owner’s policy of title insurance may offer you coverage for this title problem.
• Lack of access to your property.   Our now-famous couple, Sam and Sally Seller, own a home in the country, which you buy and move into.   You access this property by driving down a dirt road which runs off of the main highway.  You have noticed that there is a gate and fence at the entrance of the dirt road, but you think nothing of it and for some time, you use the dirt road to get to your home.  One day, you find the gate to the dirt road is now locked and you can’t get home.   You then learn that the dirt road is on property owned by Robbie Rancher, who has never granted an easement over his property to use the dirt road and he’s now decided he doesn’t want you driving up and down his dirt road to get to your home.  Your property is landlocked any without legal access.  Your owner’s policy of title insurance may offer you coverage for this title problem.

Like any other policy of insurance, an owner’s title insurance policy will contain exceptions and exclusions form coverage, and the examples above are not meant to provide an indication that coverage would, in fact, exist in any particular scenario.   However, these are real-life examples of claims I have handled when a title insurer has hired me to represent an insured owner.

Like any other policy of insurance, you may never need it.   However, if you do need title insurance, and a covered claim is made, an owner’s policy of title insurance is invaluable.   If the claim is covered under the policy, not only will the title insurer provide to you an attorney to defend your title to the property, the title insurer will also be obligated to either to “fix” the problem (if it can be fixed), or pay you the monetary losses you sustain in the event the problem cannot be fixed.

The purchase of an owner’s policy of title insurance is not required by law in Florida.   However, in my opinion, it is absolutely necessary that you protect your real estate investment through the purchase of title insurance.   Not only will you buy protection you may in the future need, you also buy some peace of mind in knowing that if a covered claim is made, the title insurance company will protect and defend your title to your home.  Don’t close on a purchase of a home without investing in an owner’s policy of title insurance.

– Nancy E. Brandt, Esq., manages the commercial litigation department of Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  She welcomes questions and comments regarding the above and can be reached at nancyb@boginmunns.com.

NO LEGAL ADVICE: This blog entry is not intended as legal advice nor should you consider it as such. It is intended only as general information.  You should not act upon this information without retaining professional legal counsel. Please keep in mind that merely subscribing to or reading this blog or otherwise contacting Bogin Munns & Munns, P.A. in the manner that you have will not establish an attorney-client relationship with our firm. Bogin Munns & Munns, P.A. cannot represent you until the firm knows there would not be a conflict of interest, and the firm determines that it is otherwise able to accept the engagement.

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