1. Introduction to the U.S. Title System
- The U.S. uses a title system, which ensures ownership and rights to real estate property.
- Different from the land registration systems commonly found in many Canadian provinces.
2. Role of the Title Company or Attorney
- In Florida, either a title company or an attorney can handle the closing process.
- They conduct a title search to ensure there are no liens, easements, or other encumbrances on the property.
3. Importance of Title Insurance
- Though Florida law does not require the purchase of title insurance, and it is considered optional, most title companies will not convey title without the purchase of title insurance.
- Protects buyers against potential claims, liens, or issues with the title.
4. Two Types of Title Insurance
A. Lender’s Policy – This protects the lender’s interests in the property against title defects. If you’re obtaining a mortgage, the lender will almost always require you to purchase a lender’s title insurance policy.
B. Owner’s Policy – This protects the buyer’s or owner’s investment in the property against loss from title defects, liens, or other related issues.
5. The Escrow Process
- Once an offer is accepted, earnest money is deposited into an escrow account held by the title company or attorney.
- This protects the buyer by ensuring funds are only disbursed upon completing all agreed-upon terms
6. Title Process
A. Title Search – Before conveying title, a title company will typically conduct a title search to identify any defects, liens, encumbrances, or other issues with the property’s title. This ensures that the buyer is receiving a clear and marketable title.
B. Municipal Lien Search – A municipal lien search is a search conducted to identify any municipal claims or liens against a property. These claims or liens might not be immediately apparent in the public records or a standard title search, so a separate, more focused search is conducted to ensure that the property is free of any undisclosed municipal debts.It’s important to note that while title insurance often protects against many title defects, it might not always cover unrecorded municipal liens, making the municipal lien search an essential step in the due diligence process for property acquisition.
Here’s what a municipal lien search typically covers:
1. Real Property Taxes – Verification of the status of real property taxes, ensuring they are current and no back taxes are owed.
2. Utility Liens – Outstanding debts for utilities such as water, sewage, trash, and sometimes electric services provided by the municipality.
3. Special Assessments – Costs imposed by a municipality for specific projects or services that benefit the property, such as street improvements or sewer installations.
4. Code Enforcement Violations – Liens arising from violations of municipal codes or ordinances, including issues related to property maintenance, illegal structures, or other code infractions.
5. Building Permit Issues – Open or expired building permits that haven’t been closed properly, potentially indicating unpermitted or incomplete construction on the property.
6. Unrecorded Municipal Liens – Liens that, for one reason or another, haven’t been officially recorded but are still valid claims against the property.
C. Title Conveyance – Once the title search is complete and any issues are addressed, the title can be conveyed. This usually takes place during the closing process, where the deed is officially transferred from the seller to the buyer.’s title. This ensures that the buyer is receiving a clear and marketable title.
6. Foreign Investment in Real Property Tax Act (FIRPTA)
- FIRPTA applies to foreign sellers, including Canadians. It requires a certain percentage of the sale price to be withheld as tax.
- Canadian sellers should be aware of this, and it’s advisable to consult a tax professional about potential exemptions or reductions.
7. Florida’s Documentary Stamp Tax
- Florida imposes a documentary stamp tax on deeds and notes/mortgages.
- It’s important for Canadian investors to factor this into their closing costs.