The Florida Legal Eagle - Volume VII

Volume VII

An Underwriting Newsletter by First American Title

PROPERTY

PROFESSOR GET TO KNOW

JOHN HEDDON

VP, DIRECTOR OF SALES, FLORIDA – AGENCY DIVISION

CLOSING CORNER

RULES FOR CLOSING

CERTIFICATIONS

AVOIDING GOTCHAS FLORIDA LEGISLATIVE

UPDATES

SHAPING THE

FUTURE www.firstam.com

IN THIS ISSUE: PAGE

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FROM THE EDITOR’S DESK LEN PRESCOTT VP, Florida State and Regional Counsel

Some things never change. As in my previous editor’s comments, I am still thinking about how quickly time is passing, how busy we are, and how change and complication remain constant in our industry. I still feel strongly about the need for each of us to find well-being and balance, and to stay safe in a world filled with changes and challenges to our industry and businesses. In prior issues, the business risks we identified such as cyberhacking and Business Email Compromise (BEC) have become greater while new complications, such as FinCEN compliance, can be challenging. In this issue, we share information about surveys, third-party payment requests, PACE assessments, and other items where risk and complications may arise.

I am not troubled by the challenges; I am fired up because each complication brings an opportunity for the Florida Agency team to help and be of service to you. Our team at First American Title has many new faces, and I hope you’ll enjoy reading about John Heddon, Director of Sales; Jim Kearn, Senior Underwriting Counsel; and Ed Hamann, Senior Underwriting Counsel. We have also made leadership and procedural changes in Florida as we seek to deliver a level of service that meets your expectations and needs. These internal changes have allowed us to explore new ideas and processes to serve you better.

How are we doing? Have you experienced the difference? Please give us the opportunity to connect with you and discuss what you want and need from your underwriter. We are passionate about the foundation for your success that has been put in place by our team, our Company, and our collaboration with each of you.

Thank you for being our agents, our partners, and our friends.

Best regards,

Len Prescott

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TITLE Executive Spotlight: John Heddon The Property Professor Underwriting / Commercial Surveys: Getting What You Need and Avoiding “Gotchas” Caution: Requests for Payment of Proceeds other than to Record Owner Underwriting Q&A: Claims of Liens and Notices of Commencement Closing Corner: Rules For Closing Certifications Under Florida Administrative Code 69B-186.008 In the Know Coffee and Espresso with the Underwriter Webinar Schedule 2018 Florida Legislative Update Shaping the Future: Multiple Tax Parcel Buildings and Remote Notary Legislation PACE Liens, HERO Assessments, and other Complications Case Law Updates Underwriting Spotlight: Jim Kearn Underwriting Spotlight: Ed Hamann Florida Statewide Underwriting Team Rapid Response Team

We Want Your Insight!

Your insight is valuable to the Florida Underwriting Team! If you would like to contribute to the Florida Underwriting Newsletter, or if you have any comments or suggestions for topics that you would like to see in our newsletter, please submit your ideas to Jim Kearn, at JKearn@firstam.com.

We look forward to your input!

First American Title | The Florida Legal Eagle 2233 Lee Road, Suite 202, Winter Park, FL 32789 407.691.5295 EXECUTIVE EDITORS: Len Prescott | Alan McCall | Jim Kearn MANAGING EDITOR: Jim Kearn

The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates. ©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

t h g i l t o p e v i t u c e S Ex J ohn H eddon

VP, DIRECTOR OF SALES, FLORIDA – AGENCY DIVISION

What was your first job in the title insurance industry?

I began my career in the title industry shortly after the collapse of the tech bubble in 2001. My position working for a boutique investment firm was eliminated, and I was unable to find a job in the finance field. My roommate worked for Lenders Advantage and I accepted a position as a business analyst. I thought I would return to a career in finance, but seventeen years later, I’m still in title.

Did you experience any major setbacks during your path to your current position?

I was working for Lenders Advantage and First American Mortgage Solutions (FAMS) when the refinance market dried up; detours were required and I was employed by a few underwriters and tech companies. Thankfully, my journey led me back home to First American Title and a great opportunity in the Agency Division.

What are some challenges you face in your current role that differ from your previous roles?

Moving from a sales position into management had several challenges. My biggest hurdle so far is making sure I don’t try to solve problems myself or dominate discussions.

Switching from my primary role in sales and problem solving, to that of coach and point of escalation, required new skills.

Fortunately, I’ve been blessed to work with Florida agency sales representatives who are welcoming and understanding as I make the transition to a new role. Another challenge is learning the nuances of the title industry in Florida, both culturally and operationally, as compared to the West Region.

I am constantly learning, excited about the opportunities, and enjoy working with the Florida team.

First American Title | Florida Legal Eagle | Volume VII

What attributes do you think an effective underwriter should possess?

There are common traits in the best underwriters I’ve worked with over the years; empathy, creativity and thoroughness.

They keep moving the transaction forward, and although it may take some time, they deliver solutions and provide underwriting details necessary to close the transaction.

Do you have any interests or hobbies outside of work?

My hobbies and interests were put on hold in March of 2017, when my daughter Emily was born. She is my hobby, interest and second job. Before Emily’s arrival, I played golf when it wasn’t snowing, and went snowboarding when it was. I’m a big music fan and love to attend both big and small live shows. As a new resident in South Florida, I’m excited to explore all this area has to offer.

Can you tell us one piece of advice you give your Florida team?

The best advice I can give to our underwriters and agency employees is to put themselves in their agents’ shoes.

Whether on the phone or in person, take a moment to understand the pressure and stress agents experience and show compassion. Our goal is to provide our agents with a positive experience while helping them succeed and close deals.

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THE

PROPERTY

PROFESSOR Alan McCall VP, Southeast Region Underwriting Counsel, Daytona Beach, FL

Dear Property Professor,

I received a search from the title company in December and closed the following June. After closing, an IRS lien for $500K was found to have been recorded in March, during the gap.

Dear Perplexed,

There are at least three gaps (not including the one between my ears): 1. The gap between title-check downs from the previous title search and the one before closing; 2. The one in the recorders’ offices between the filing of documents and their accessibility in the indexes; and 3. The gap between closing and the recording of the documents.

While there is interplay between all three, there isn’t much the closer can control with number 2. If this gap is significant, it should be taken into consideration when deciding whether to disburse at the table. For instance, if the seller is in trouble, judgments against him/her are starting to appear, or if there is a real possibility of a bankruptcy filing, it may be a good idea to file the documents, check the title, and then disburse once the all-clear is given. This narrows or possibly eliminates the risk of something being filed in the gap.

The length of time between the last check-down of title and the closing should also be narrowed as much as possible to eliminate the filing of law suits, judgments, liens, mortgages and other matters that could be discovered in a complete examination of title up to the day of closing, subject to the recorders’ gap in number 2. It is recommended the last check down occur the day of or day before closing, if possible.

Doesn’t my underwriter cover the gap? If so, why are they asking me all these questions? – Perplexed in Pierson

A title affidavit at the time of closing should include a statement that the seller or borrower has suffered no transfer, lien or encumbrance to be filed against the title other than what appears in the title commitment.

Narrowing the gap in number 1 is half the job of the title closer; number 3 is the other half. The documents should be recorded timely in accordance with the instructions of all parties. The agent’s contract requires that they follow all the procedures of the title insurer they represent in closing. In our case, that means delivering the documents by overnight carrier, courier or other means as soon after the closing as reasonable, i.e. generally by the next business day. There may be extraordinary circumstances where walking the documents to the courthouse may be required the day of closing to insure over a special risk. The agent should discuss this with their underwriter to determine if special handling is required.

Each aforementioned gap must be addressed satisfactorily by the closer, underwriter and agent to avoid the misunderstanding that sometimes occurs when the popular notion, that the underwriter “takes the gap,” is repeated and relied upon. Yes, we are willing to take on the recorders’ gap in number 2, but not in every case. The other gaps, not so much.

The closer, agent or office plays a central role in narrowing those gaps as much as possible. Moreover, in special cases, the underwriter may require that the gap described in number 3, is eliminated.

In this case, I am sure that the IRS will be friendly and helpful to deal with. – Property Professor

First American Title | Florida Legal Eagle | Volume VII

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Underwriting / Commercial Surveys

GETTING WHAT YOU NEED AND AVOIDING “GOTCHAS” The Latest ALTA/NSPS Standards and Revisions to Florida Statutes and Code James (Jim) Kearn, Esq., Senior Underwriting Counsel, Winter Park, FL

The American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS) issued the latest, seventh revision to the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys (Standards) which are effective as of February 23, 2016. Over the last two years, title professionals have been surprised to discover surveys furnished under these new Standards do not necessarily include or graphically show all the information they were accustomed to receiving, expecting, and needing. These material omissions in surveys were often discovered at the most inopportune time, i.e., near the end of a Due Diligence period in commercial contracts, when there was insufficient time to have the survey corrected to reflect the information desired, in order to make timely objections.

Florida title professionals also discovered the new Standards conflicted with Florida Statutes and the Florida Administrative Code (FAC) which has recently been revised to eliminate these conflicts. This article will discuss: i. Why the Standards were revised ii. Significant revisions to the Standards iii. The latest revisions to the Florida Statutes and FAC iv. What the title professional should confirm when ordering an ALTA/NSPS survey v. What to check the survey for in order to rely on it Why Did ALTA and NSPS Revise the Standards?

The Standards were first established in 1962 to create uniformity among the states to serve the needs of increasing interstate lending. Though local lenders would frequently be the lead lender, they would share the loan with out-ofstate lenders to spread the risk of a major default on projects with large financing needs. There were six more revisions of the Standards through 2016, the latest of which can best be understood through the perspective of the Great Recession.

During the recession, surveyors were increasingly added to foreclosures by parties seeking to shift liability to surveyors to offset their own losses. Surveyors were sued for omitting matters customers thought should have been shown, or for including offsite matters for information only, which others relied upon to their detriment. To remedy this, the 2016 revisions, generally speaking, better defined and scaled back a surveyor’s duties, unless the parties agreed otherwise.

What are the Significant 2016 Revisions to the Standards?

The Standards changed the definition of surveying. Under the prior 2011 Standards, the surveyor had to prepare the “plat or map showing the results of the fieldwork and its relationship to record documents…” The 2016 Standards instead simply require the surveyor to prepare the “plat or map … showing the results of the fieldwork and its relationship to documents

provided to or obtained by the surveyor…” So, if documents are not provided to the surveyor, the 2016 Standards state, “the surveyor shall be required to conduct only that research which is required pursuant to the statutory or administrative requirements of the jurisdiction where the property is located...” What does that mean in Florida? It means that all the surveyor has to do is tie the description to Section corners and reflect what is on a plat. As many title professionals have noted, this is frequently no more than what can be found on a county website, without the benefit of survey.

The surveyor’s duty to research the public records also has narrowed. Under the 2011 standards, the surveyor was to “be provided with appropriate data which can be relied upon in the preparation of the survey.” The 2016 Standards require that “In order to complete an ALTA/NSPS Land Title Survey, the surveyor must be provided with complete copies of the most recent title commitment or other title evidence satisfactory to the title insurer if a commitment is not available.” The surveyor also must be furnished: (i) “current record descriptions of any adjoiners to the property to be surveyed”, except where adjoiners are lots in platted subdivisions, (ii) “any recorded easements, servitudes or covenants burdening the property…” and (iii) “any unrecorded documents affecting the property being surveyed and containing information to which the survey shall make reference, if desired by the client.” If the foregoing are not furnished, or if other non-public or quasi-public documents are required to complete the survey, the surveyor doesn’t have to independently find and show them. They only have to furnish the minimum required by Florida law, which again, is to tie the description to Section corners, and reflect what is on a plat, which one can do without having to obtain a survey.

The information given to the surveyor must be legible.

Otherwise, it does not have to be shown as long as there is a note to that effect on the survey. This can prove to be problematic in older sections of Florida cities platted from the 1880s through the 1920s, whose public records and plats are frequently illegible. In the two years since these Standards have gone into effect, many title professionals have been surprised to receive a survey with a note that certain encumbrances weren’t shown because they were illegible, as is allowed under the Standards.

The surveyor’s Fieldwork duties have also been lightened.

Though the prior 2011 and 2016 Standards require the surveyor to do what’s required by state law, the 2016 Standards introduce a new subjective standard. Certain items listed in Fieldwork (Section 5 of the Standards) may be “located to what is, in the surveyor’s professional opinion, the appropriate degree of precision based on the planned use of the property, ... Continued 

First American Title | Florida Legal Eagle | Volume VII

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Underwriting / Commercial Surveys

Getting What You Need and Avoiding “Gotchas” Under the Latest ALTA/NSPS Standards and Revisions to Florida Statutes and Code ... Continued

if reported in writing to the surveyor by the client, lender, or insurer…” This arguably creates an ambiguity within the Standards. Does a surveyor have to perform to the standards required by Florida Statutes and the Florida Administrative Code or may the surveyor work instead to what they believe is the “appropriate degree of precision” for that project? This also seems to be at odds with FAC 5J-17.051 (15) which sets objective standards for accuracy regarding the several types of surveys in Florida listed therein. Nowhere in the relevant Florida Statutes or FAC does there appear to be license for a Florida surveyor to use their professional opinion as to what’s appropriate based on the end use.

The new Standards for showing Rights of Way and Access are also arguably ambiguous. The prior standards required the survey to show the width and location of an abutting street or right of way. The 2016 Standards have retained this, but added, “If the documents provided to or obtained by the surveyor… indicate no access from the surveyed property to the abutting street or highway, the width and location of the travelled way need not be located.” This does not seem to make sense. If the property abuts a street or highway, there presumably is legal access to the highway by virtue of abutting it, unless the highway is a limited access highway such as an Interstate.

Second, it’s not clear what travelled way is being addressed.

Assuming the travelled way is that abutting street, the width and location of that travelled way is key to determining if it extends onto the property surveyed, or if improvements on the property extend into that travelled way. It also seems important to locate the travelled way for purposes of deleting the general survey exception and to note such specific exceptions, based on the survey read, on Schedule B. It’s not clear how this could be done if the travelled way is not accurately and completely shown on the survey. Is that travelled way some path on or across the property surveyed which is evidence of some type of use or easement? If so, that would need to be shown.

The new Standards also provide that if documentation regarding the location of any street, road, or highway right of way crossing the property was not disclosed in documents provided to or obtained by the surveyor, and if they are not otherwise available, all the surveyor has to do is locate the parcel corners on the same side of the street as the surveyed property. The surveyor may indicate the location of such right of way lines, but doesn’t have to show its width. Many agents have pointed out this defeats one of the primary purposes of obtaining the survey, i.e., to show such easements arising from the continuous crossing of the property, and/or to delete to the standard survey exception.

The new Standards provide that the character and location of all walls, buildings, fences, and other improvements within 5’ of each side of the boundary lines observed in the process of conducting the fieldwork must be shown unless physical access is restricted. In that case, the surveyor doesn’t have to show those improvements, so long as they note they did not have access to all such improvements. Over the last two years, this has been an unwelcome surprise to agents receiving a survey on the closing day, or at the end of the Due Diligence

First American Title | Florida Legal Eagle | Volume VII

period. It’s small consolation to learn from a survey note the survey does not include key details close or on the border of a commercial property.

Showing the use by someone other than the occupant of the property being surveyed has been limited by the new Standards. Now, the surveyor only has to show evidence of activity on or above the surface which may indicate utilities located on, over or beneath the surveyed property. This revision could lead to the surveyor not showing all activities on the property, such as mining or gouges of the land, etc., which evidences use of any surface right of entry, since such activities would not necessarily be evidence of a utility under the new Standards.

The 2016 Standards require the surveyor to only show water bodies within 5’ of the perimeter of the property being surveyed. Water management bodies in Florida routinely require a 25’ easement/buffer around retention ponds to maintain the proper slope and to prevent subsidence. A retention area that is 10’ beyond the border would ordinarily have a 25’ easement/buffer around it that extends 15’ onto the property being surveyed. The surveyor would not have to show that under the new Standards.

The surveyor also has less to do when encountering gaps between multiple properties which are quite common in commercial development. Under the old Standards, the surveyor had to disclose them to the insurer and client for determination of a course of action concerning junior/senior rights… prior to the preparation of the final plat or map. The 2016 Standards simply requires the surveyor to disclose the gaps upon the delivery of the survey.

There are significant changes to Table A, which lists Optional Survey Responsibilities and Specifications. It is no longer explicitly mandatory that the services listed thereon be negotiated. Now, they simply may be negotiated. Also, the surveyor no longer has to be primarily responsible for the accuracy of the parking and zoning information shown. The surveyor simply needs to refer to the date and source of a letter from the respective agency or department that furnished such information.

Identification of site used as a solid waste dump, sump or sanitary landfill has been removed from Table A altogether as an optional task to be performed by the surveyor. The assumption is these types of uses are more revealed by a Phase One Environmental Assessment commonly obtained. Instead, Table A only has, as an optional service, the identification of substantial areas of refuse. The absence on a survey of anything regarding a dump, sump or sanitary landfill cannot be interpreted to mean they aren’t or weren’t there. Identification of wetlands has also been eliminated.

Table A provides that the surveyor will maintain Professional Liability Insurance policy in the minimum amount agreed to by the parties for the contract term, but that won’t be addressed on the face of the plat or map. This change contradicted Florida

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Administrative Code ch.J-17.015 which explicitly required the surveyor to state in letters at least 1/4’’ high that the survey depicted is not covered by professional liability insurance, if that be the case.

Conflict between the 2016 Standards and Florida Law The Standards directly conflicted with Florida law. The elimination of any mention of professional liability insurance coverage on the face of the survey directly conflicted with FAC ch. 5J-17.015 (2016) which required Florida surveyors, with no professional liability insurance, to print on the survey, in letters at least 1/4’’ high, that the survey is not covered by professional liability insurance.

The introduction of a subjective standard in the 2016 Standards contravenes the requirements for measurements and accuracy in FAC that must be observed by Florida surveyors when preparing any one of the 11 types of surveys detailed in FAC. 2017 Changes to Florida Statutes and FAC Effective July 1, 2017, Florida Session Law 2017-85 amended Fla. Stat. ch. 472 regarding surveyors. It revised requirements for licensing, redefined the terms practice of surveying and mapping, and eliminated the requirement for surveyors to have an impression type metal seal, and for surveys to have a raised, embossed seal.

The Division of Consumer Services, in turn, revised the FAC and effective November 13, 2017, surveyors no longer had to note on the survey they carried no professional liability insurance.

The revised FAC 5J-17.015 requires surveyors to furnish written notification directly to the client which clearly and conspicuously states neither the business entity nor the individual licensee has professional liability insurance. While this revision eliminates the conflict between the 2016 Standards and the FAC, it leaves agents and title underwriters uncertain if the certified survey they receive and rely upon to delete the survey exception, issue Florida Form 9, and to note additional exceptions Schedule B, is backed by professional liability insurance.

The types of surveys covered by the FAC was also revised to include photogrammetric surveys, including orthorectified imagery. Unlike the 2016 Standards, the FAC does not allow any subjective standard to be employed by the surveyor, depending upon the project.

Recommendations for Ordering and Inspecting an ALTA/NSPS Survey To make sure you receive the ALTA/NSPS commercial survey needed, and to avoid the omissions detailed above, agents and their customers should confirm at the outset what they want the surveyor to do and the survey to show, which includes the following: • Obtain the title commitment first, and furnish it, with legible copies of all instruments therein and any unrecorded instruments.

• Confirm the survey will show the width and location of any and all travelled ways, including those which abut or cross the land surveyed.

First American Title | Florida Legal Eagle | Volume VII

• Confirm there is and will be physical access to all areas of

the land and improvements to be surveyed, so the survey accurately depicts all improvements on the property.

• Show all structures, activities, and scars on land, and not just evidence of activities on or above the surface which may relate to utilities.

• Identify water bodies within 25’ of the perimeter of the surveyed land.

• Confirm the surveyor will not employ their own subjective standards in lieu of those set forth in the Florida Administrative Code.

• Confirm the surveyor carries professional liability insurance with limits appropriate to the transaction; that it is in place when the survey is being done and is occurrence based; and otherwise complies with the requirements of the FAC. Once the survey is obtained, confirm it contains the following: • Name, certificate or authorization number (usually a LB #), street and mailing address of the Licensed Business Entity for which the individually licensed surveyor may work.

• Name and license number (usually a “PSM#) for the Professional Surveyor or Mapper.

• Date, signature and seal of the professional surveyor or mapper who prepared the survey. oo Pre 11/13/17: Survey must contain a statement that it is not valid without both the signature and the original raised seal of a Florida licensed surveyor and mapper. oo On and after 11/13/17: Survey must contain a statement that it is not valid without the signature and the seal of a Florida licensed surveyor and mapper.

• Certification to the owner and lender, the agent, and First American Title Insurance Company.

• Adequate and accurate legal description which agrees with the deed or mortgage.

• Insurance evidence oo Pre 11/13/17: Lack of insurance must be noted on the survey. oo On and after 11/13/17: Survey contains no information regarding professional liability insurance, so confirm insurance is in place with surveyor prior to ordering.

• Survey type (as-built, boundary, hydrographic/ bathymetric, tidal or non-tidal, etc.) so it can be relied upon under Florida law for the purpose it was ordered.

• Visible boundary lines, locations and dimensions of improvements, locations of utilities, easements, rights-ofway, and natural and manufactured objects affecting the property, to assure there are no encroachments onto the property insured, or encroachments by the improvements on the property that is insured to adjoining lands.

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CAUTION!

Requests for Payment of Proceeds other than to Record Owner Chip Koval, Esq., Underwriting Counsel, Gainesville, FL

Requests to disburse to a person or persons other than the record owner or a person not a party to a contract are not new or uncommon.

We have all had that troublesome transaction where title is held in a trust, and it is finally going to close this afternoon. You’ve spent a lot of time and energy tracking down trustees and beneficiaries, and dealing with creditors wanting a piece of the proceeds. Your client, the sole remaining trustee, arrives for the closing. You sit down to go over the documents with her, and when you’re all done she asks, “Would it be too much trouble for you to issue the check to me individually?

We never opened a bank account for the trust, and I don’t know how I’ll be able to get the cash!” As a closer or closing agent, you have a duty of care to the parties to the transaction. How do you fulfill that duty of care?

the risks you may be undertaking because they chose not to open or maintain a bank account.

You need to be vigilant in watching for situations that could result in your liability as the closer to the record owner. The risks are real and have resulted in successful claims against agents. In one situation, a New York attorney represented a Florida LLC in the sale of commercial property. At the closing, the attorney told the closing agent the LLC no longer had a bank account. To simplify things, the attorney suggested the check be payable to his trust account, and he would disburse to the LLC. The closer agreed. The attorney never disbursed the money to the LLC members and absconded with funds. The LLC filed a claim against the First American Title Insurance Policy which was denied.

First American Title also declined representation of the closing agent in the suit brought by the LLC members.

There is no statute or regulation requiring proceeds of a real property transaction be paid to the record owner. At some level, it seems reasonable that a well-documented and authorized request by the In another instance, an elderly owner was accompanied by her son to person you have been dealing with to disburse to a third party would the closing of her cash-out refinance. When the closing agent asked the not be a problem, especially, if that third party may not appear as owner what she was going to do with the proceeds, she said she was a third party. However, there are plenty of reasons going to buy a sailboat and sail around the world. why that is NOT the best course and why it is critical The closing agent became suspicious of the son’s “Would it be too much you understand to whom you owe your duty of motives and refused to close the transaction. Mother care, especially, when the request comes from a and son went to another title company. The deal trouble for you to seller trustee or an LLC, particularly a dissolved was closed and the proceeds were made payable or disregarded LLC. In both instances, the seller’s to the son who said his mother did not have a bank issue the check to me representative claims there is no bank account, and account. The mother never received the funds, and they don’t have the ability (or maybe the motivation) the First American Title agent initially approached individually? We never to open one. The request is more problematic when about the transaction avoided a potential lawsuit. there are multiple beneficiaries of a trust, or multiple opened a bank account It used to be banks were relatively comfortable members of the LLC, and you have no contact with any of them. What evidence do you have that you requests to open short-term for the trust, and I don’t accommodating have received a proper and complete list of payees, checking accounts to help with these types of or that they have authorized payment to them Increased costs of doing business, as well know how I’ll be able to situations. individually? This issue is not limited to sales by as changes in banking regulations, make banks a trusts or LLCs, and can easily occur when dealing little less willing to do so now. They do not generate get the cash!” with property owned by individuals. any revenue from short-term deposits. Banking regulations now require verification of the identity of The primary reason for denying the request to make payments other anyone with a 25% or more interest in the entity opening the account. It than to the record owner of the property is the potential liability for you is possible the bank will still open the account, especially if the person and your office if the funds do not make their way to the lawful owners. making the request is otherwise a good customer. Even though this This is a closing issue and not a title insurance issue. It is liability based might be perceived by your client as a hardship, remain aware of the in contract, or closing agent liability based on the closer’s fiduciary impact your decision could have on you and your company. duties to the record owner. Typical contract terms obligate the closing agent to disburse funds received in accordance with the terms and There may be a time when you consider accommodating a request conditions of the contract or closing instructions. The contract directs to make transaction proceeds payable to someone other than the payment be made to the seller as defined in the contract, not to any record owner. Again, there is no statute or rule that says you cannot. persons related to or comprising the seller.

Always take the time to understand the risks and do whatever you can to reduce liability. The better you know the customer, the easier it is to When your client asks you for authority to support your position, what be complacent and have blind spots. If you’re going to deviate from do you say? It would be helpful to have policies and procedures that your written policies, be sure to document why you did so. Obtain operationally define who is the record owner and direct that payment consents and authorizations from the beneficiaries or LLC members be made to them. Those policies could be perceived as self-serving, that detail and confirm all parties entitled to a share of the proceeds. but there is nothing wrong with having policies and procedures that protect you as long as they are not unreasonably burdensome for Each transaction is unique, and your duty of care relative to each your clients. In both trust and LLC situations, those individuals or their transaction is also unique. If you have questions or concerns about predecessors chose to take advantage of the benefits associated with a particular situation, please contact your First American Title taking ownership in the manner in which they did. Carefully consider underwriter.

First American Title | Florida Legal Eagle | Volume VII

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Underwriting Q&A

Claims of Liens and Notices of Commencement Bill Boyce, Esq., Senior Underwriting Counsel, Tampa Bay, FL

A claim of lien was recorded on December 1, 2017. Do I have to wait until December 1, 2018 before I can close without exception for the claim of lien?

Yes, unless you implement a strategy to terminate the lien or shorten the effective period of the lien. Generally, a claim of lien or amended claim of lien is effective for one year after it is recorded. This period can be tolled or extended if the owner files bankruptcy. However, you can implement one of the following strategies to terminate the lien or to shorten the time to enforce it: 1. Pay the claim and obtain and record a satisfaction or release. This is obvious and old-fashioned, but it remains an effective strategy.

2. File a Notice of Contest of Lien to shorten the effective period to 60 days. This is done by recording a Notice of Contest of Lien pursuant to §713.22, Fla. Stat. A sample form and instructions are provided in the statute.

Upon recording the Notice of Contest of Lien, the clerk serves notice at the address shown in the claim of lien.

If the lienor fails to institute suit to enforce his or her lien within 60 days after service, the claim of lien is automatically extinguished.

3. Transfer the lien to security (bond the claim of lien) pursuant to §713.24, Fla. Stat. The transfer of a claim of lien to a bond is done by depositing money in the clerk’s office in the amount of the claim of lien, plus interest for three years, plus $1,000 or 25% of the amount demanded in the claim a lien, whichever is greater. Upon making the deposit, the clerk files a certificate showing the transfer of the lien from the real property to the bond. If a proceeding to enforce the transfer lien is not commenced within the permitted time period, the clerk returns the security.

4. File a complaint for an Order to Show Cause pursuant to § 713.21(4), Fla. Stat. to shorten the time period to 20 days for the lienor to show cause why his or her lien should be enforced. You do this by filing a show cause complaint and serving a summons on the lienor. If the lienor fails to commence an action to enforce the lien before the 20 day return date on the summons, the court will cancel the lien.

5. Demand a Sworn Statement of Account pursuant to §713.16, Fla. Stat. The owner does this by serving a written demand for a written statement, under oath, showing the labor or services performed, materials furnished, amount paid on account to date, amount due and amount to become due. If the person fails to furnish the statement under oath within 30 days after the demand, the person is deprived of any lien. A form to request the sworn statement is provided in the statute.

First American Title | Florida Legal Eagle | Volume VII

The Notice of Commencement will expire on November 5, 2018, and I want to close on October 16, 2018. Do I need to file a Notice of Termination?

No, and please don’t. A Notice of Commencement cannot be terminated any earlier than 30 days after the Notice of Termination is recorded. Because you intend to close before 30 days after the Notice of Termination is recorded, the Notice of Termination will not shorten the effective period of the Notice of Commencement. In addition, the Notice of Termination arguably would extend the effectiveness of the Notice of Commencement until 30 days after the Notice of Termination is recorded.

The work for a roof was completed three weeks after the Notice of Commencement was recorded on March 2, 2018. Do I need to record a Notice of Termination for a transaction scheduled to close on October 10, 2018?

No. A claim a lien must be recorded no later than 90 days after the final furnishing of labor or services. Because the work was completed more than 90 days before closing, you would not need to record a Notice of Termination. You would include in the seller’s affidavit an affirmation that no improvements have been made to the property within the past 90 days for which payment has not been made in full.

A Notice of Commencement was recorded on February 3, 2018, but the work was never commenced. The owner now wants to close on a construction loan on October 15, 2018. Do I need to include an exception for the Notice of Commencement in the policy?

No. If the improvement described in the Notice of Commencement is not actually commenced within 90 days after the recording of the Notice of Commencement, the Notice of Commencement is void. You should obtain and record an affidavit from a person with knowledge stating construction did not commence within the 90-day window.

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Closing Corner

Rules For Closing Certifications Under Florida Administrative Code 69B-186.008 Stefanie Lollis, Escrow Branch Manager, Winter Park, FL

What is the Florida Administrative Code 69B-186.008?

This rule in the Florida Administrative Code became effective on October 28, 2015. The rule creates the requirement for certain certifications from the settlement agent, title agency and also the parties to the transaction. These requirements apply to all transactions, including commercial, residential, TRID and NON-TRID in which a title insurance policy is being issued.

Settlement Agent Certification The settlement agent is required to provide the following written statement: I have reviewed the Closing Disclosure, the settlement statement, the lender’s closing instruction and any and all other forms concerned with the funds held in escrow, including any disclosure of the Florida title insurance premiums being paid, and I agree to disburse the escrow funds in accordance with the terms of this transaction and Florida law.

Title Agency Certification The title agency must provide parties to the transaction with the following information: 1. Name and license number of the title agency issuing the title policy and/or disbursing the escrow funds; and 2. Name and license number, if applicable, of any other settlement agent directly responsible for disbursing escrow funds.

Certifications by Parties to the Transaction: All buyers, borrowers and sellers are required to provide written approval authorizing the holding of escrow funds and the disbursement of same by the title agency handling the actual disbursement.

While it is up to the agent to determine how they will comply, the use of Department of Financial Service (DFS) Form H1-2146 is a recommended best practice. Part of this form shows a new premium comparison.

Important Note: This may not be applicable to all transactions. Accordingly, agents may choose to incorporate the signature blocks and certification into the closing statement or fill out only the applicable portions of the DFS form. However, the agent is able to determine how they are going to comply. Be aware that the rule requires whatever form is used to comply must be provided to the buyer, seller and the lender and be maintained for five years.

Florida Administrative Code 69B-186.008 is shown below and contains a link to DFS Form H1-2146 for use or reference.

69B-186.008 Escrow Disbursements.

1. For purposes of this rule, the term “settlement agent” refers to the title insurance licensee or licensee’s designee who receives and disburses funds in accordance with Section 626.8473, F.S. 2. Any person disbursing escrow funds being held as part of a real estate transaction in which one or more title policies are to be issued must provide the parties to the transaction with the information required by this rule.

3. A written statement by the settlement agent must certify that he or she has reviewed the forms prepared for the transaction and agrees to disburse the escrow funds in accordance with the terms of the transaction and Florida law. Compliance with the aforementioned certification requires the settlement agent to certify to the truth of the following statement: “I have reviewed the Closing Disclosure, the settlement statement, the lender’s closing instructions and any and all other forms concerned with the funds held in escrow, including any disclosure of the Florida title insurance premiums being paid, and I agree to disburse the escrow funds in accordance with the terms of this transaction and Florida law.”

4. The title agency must provide the parties to the transaction with the following information no later than the time such funds are disbursed: • The name and license number of the title insurance agency issuing the title insurance policy and/or holding and disbursing the escrow funds. If there is more than one title agency involved in the transaction, a separate form is to be provided by each agency. Any agency not holding any escrow funds should disclose that to the parties to the transaction at this time.

• The name, and when applicable, the license number of the settlement agent responsible for disbursing the escrow funds. ... Continued 

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Page 10

Rules For Closing Certifications Under Florida Administrative Code 69B-186.008 ... Continued 5. All buyers, borrowers and sellers involved in the transaction must provide written approval authorizing the holding of escrow funds and disbursement of escrow funds by the named title agency.

6. In addition to the requirements listed above, the title insurance agency must provide the parties to the transaction with the following information when a Closing Disclosure form is completed by the lender and the cost for the title insurance policies being purchased differs from the premium calculated pursuant to Rule 69O-186.003, F.A.C. • A written comparison of the cost of the lender’s policy versus the cost of an equivalent policy based on Florida premium rates. The cost comparison must clearly disclose the premiums being charged for all endorsements in addition to the base policy.

• All sellers, buyers and borrowers involved in the transaction must acknowledge and authorize in writing that the title insurance premiums will be disbursed from the escrow funds in accordance with the premium disclosure certification.

7. Any form or forms that satisfy the requirements of this rule will be considered part of a title insurance and escrow transaction in Florida. Such form or forms will not constitute loan documents.

8. A completed and signed copy of the approved form or forms must be: • Provided to the buyer, seller and lender who are named in the transaction; and, • Maintained in the title insurance agency files for at least five (5) years.

9. Form DFS-H1-2146, http://www.flrules.org/Gateway/reference.asp?No=Ref-05954, “Florida Insurance Premium Disclosure & Settlement Agent Certification,” (Effective 10/03/2015), meets all of the requirements necessary to comply with this rule and is incorporated by reference herein. The form is available from the Department of Financial Services, Division of Insurance Agent and Agency Services, at http://www.myfloridacfo.com/Division/Agents.

Rulemaking Authority 624.308(1), 626.8473(6) FS. Law Implemented 626.8473 FS. History–New 10-28-15.

In the Know The Florida Education, Training, and Special Projects Department is dedicated to supporting First American Title Florida agents through the creation and delivery of specialized training.

Sue Dutcher Director

Dona Sutton

Veronica Johnson

Florida Agency Technical Trainer

Florida Agency Senior Technical Trainer

Barbara Burke

Paula Rutter

Camala Wiles

Agency Operations Coordinator

Legal Education Specialist Senior Project Coordinator

First American Title | Florida Legal Eagle | Volume VII

Page 11

with the

Underwriter

Camala Wiles, Senior Project Coordinator, Tallahassee, FL

A prominent executive said he owed his success, not to having all the answers, but to hiring people who were smarter than he was and letting them do their jobs. He understood the importance of surrounding himself with those who were more knowledgeable, experienced, and experts on relevant subject matter.

First American Title has a staff of articulate, educated, intelligent, experienced underwriters and subject matter experts available to everyone who needs their help. Coffee with the Underwriter was born as a result of an account manager joining forces with Sue Dutcher, Florida Director of Education and Special Projects, to initiate an ongoing educational webinar program designed to bring the knowledge and expertise of our underwriters and experts to the desks of our agents.

Coffee with the Underwriter, hosted by Barbara Burke, Legal Education Specialist for First American Title, is a monthly webinar series focusing on current title industry topics held the second Wednesday of every month from 9:30am—10:30am (ET).* Each month, the First American Florida Education and Underwriting teams collaborate, sharing ideas and suggestions, often directly from our agents, and develop viable topics and content-rich presentations. Some of the previously covered topics include: trusts, bankruptcies, surveys, mobile homes, endorsements and the Marketable Record Title Act (MRTA).

Each webinar is recorded and can be accessed from the AgentNet® Content Library. 2018 webinar topics include: cyber-insurance, leaseholds, mortgage modifications, Planned Unit Developments (PUDS) and the Mutual Indemnification Agreement. We are currently working on the development of webinar content for 2019.

Since the inception of Coffee with the Underwriter, more than 6,000 people have attended the monthly presentations. Our numbers continue to grow as industry professionals become aware of the program and recognize it’s exponential value. A few comments from our agents: • While I understood 95% of the seminar material, I picked up a couple of good pointers we can use right away. That’s why CLE seminars are necessary. Well done and thanks again.

• I want to thank First American Title for taking the time to put on the webinar. The subject matter was good and the speakers were great. I always learn something in every session. Our business is changing on a daily basis and it has become very important to stay on top of it all.

Improving my knowledge makes me a better title person and an important part of the company.

• Loved the webinar this morning! Thanks for all that you did to prepare and deliver the presentation. Another great job by all.

• Thank you … the webinars are always informative and enjoyable!

One benefit of the webinars is their trickle-down effect; agents are educated on current industry topics and are able to provide a better experience for customers. Satisfied customers share their experiences with others, which creates the potential for new customers. Coffee with the Underwriter is another example of how First American Title continues to find ways to strengthen, enhance, and add value to our agent relationships.

If you do not currently receive a monthly invitation to register for the webinars, reach out to your local account manager and request they add you to their distribution list.

As an approved provider, First American Title offers continuing education credit for licensed Florida title agents, Florida Bar attorneys and registered paralegals, and members of the National Association of Legal Assistants. Eleven webinars are scheduled each year with four or five qualifying for continuing education credit.**

*Due to the FLTA convention, there is no webinar in November. **In order to receive credit as a licensed Florida title agent, specific guidelines and criteria must be met. Be sure to contact your local account manager for more information.

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2018 Florida Legislative Update Jennifer Bloodworth, Esq., Senior Underwriting Counsel, Winter Park, FL James (Jim) Kearn, Esq., Senior Underwriting Counsel, Winter Park, FL

Session Law 2018-15 – Bankruptcy Foreclosure Proceedings. This law adds Section 702.12, F.S., to authorize lienholders, in an action to foreclose a mortgage, to use documents a foreclosure defendant filed under penalty of perjury in a bankruptcy case for use as an admission by the defendant. Additionally, the bill provides for a rebuttable presumption that the defendant has waived any defense to the foreclosure if: (1) the defendant filed in its bankruptcy case documents that evidence the defendant’s intention to the surrender the subject property; (2) the documents have not been withdrawn by the defendant; and (3) the lienholder can show a final order has been entered in the defendant’s bankruptcy case that discharges the debtor or confirms a bankruptcy plan providing for the surrender of the property. This law applies to any foreclosure action filed on or after October 1, 2018.

Session Law 2018-22 – Homestead Waivers. This law adds Section 732.7025, F.S. It provides a mechanism for a spouse to waive his or her Florida Constitutional homestead rights as a surviving spouse by adding language to the face of a deed that clearly evidences a spouse’s intention to waive homestead rights that would otherwise prevent the other spouse from devising the homestead property to someone other than the waiving spouse. This law became effective July 1, 2018. IMPORTANT: First American has not changed any underwriting guideline at this time. Agents must seek advice from their local First American underwriter prior to relying on such a waiver.

Session Law 2018-55 – Covenants and Restrictions. This law revises Chapter 712, F.S., Marketable Record Title Act. Among other things, this law: (1) extends the scope of this chapter to include property owners’ associations instead of only homeowners’ associations, which has the effect of extending statutory provisions regarding preservation and revival of covenants and restrictions to a broader range of associations, including commercial property owners’ associations and so-called voluntary associations; (2) requires a homeowners association to annually consider preservation of the covenants and restrictions, and (3) sets forth new procedures and creates a statutory form for preservation of covenants and restrictions. This law becomes effective October 1, 2018.

Session Law 2018-58 – Business Filings. Subject to certain conditions, this law authorizes persons and entities to correct documents filed with the Department of State (Department) without being subject to additional fees. It also requires the Department to send notices of a filing to the email address on file for the entity or its authorized representative, or send a copy of the document to the address of such entity or its representative. If the record changes the email address for the company, the Department must send such notice to the new email address and to the most recent prior email address. If the record changes the mailing address for the entity, the Department must send such notice to the new mailing address and to the most recent prior mailing address. This law became effective July 1, 2018.

Session Law 2018-83 – Unlawful Detention by a Transient Occupant.

This law adds Section 82.045, F.S., to revise criteria establishing a person as a transient occupant of residential property and to establish rights, under certain conditions, to recover personal belongings left at the property by the transient occupant. This law became effective July 1, 2018.

First American Title | Florida Legal Eagle | Volume VII

Session Law 2018-94 – Possession of Real Property. This law amends statutory sections dealing with ejectment, unlawful and forcible entry, and unlawful detainer actions, all of which involve a person entitled to possession of real property seeking to recover possession of the property after being wrongfully removed. It also creates Section 163.035, F.S., which addresses the common law doctrine of customary use or the general right of the public to use and access the dry sand area of a beach on private property and, subject to certain exceptions and procedural processes, prohibits local government from enacting or enforcing an ordinance or rule that would establish rights of the public across private property based on customary use. This law became effective July 1, 2018.

Session Law 2018-96 – Community Associations. This law revises various sections of Chapters 718, 719, and 720, F.S. The revisions amend requirements related to record keeping, financial reporting, association websites, meeting notices, term limits, approval of material modifications or additions to common elements or association property, and procedures for amendments to a governing document.

It also specifically authorizes installation of charging stations for electric vehicles, prohibits certain board members under Chapters 719 and 720 from voting via email, and makes Part VII of the Condominium Act, Distressed Condominium Relief, permanent. This law became effective July 1, 2018.

Session Law 2018-118 This is a comprehensive tax law which became effective July 1, 2018, revises several statutes on assessments, taxation, and tax deed sales as follows: Taxation. Some of its provisions affecting real property include: (1) an exemption from documentary stamp taxes for certain transfers of homestead property between spouses; (2) a reduction of the state’s sales tax rate on commercial leases from 5.8% to 5.7%; (3) new Section 197.0237 for the separate assessment of one or more parcels contained in a building, including allocation of value of the land among such parcels, and requiring the assignment of a unique, separate tax folio numbers to multiple parcels on or above a specific parcel of land (See following Article on Multiple Tax Parcels); and (4) creation of disaster relief credit for taxes paid for residential properties that were damaged or destroyed by Hurricane Hermine, Hurricane Matthew, or Hurricane Irma.

Tax Deed Sales. This law revises various subsections of Chapter 197, F.S., dealing with tax deed sales. The bill clarifies requirements that must be satisfied, including costs that must be paid, by the certificate-holder when applying for a tax deed. It requires all tax collectors to contract with title companies or abstract companies to provide a property information report, the fees for which will be added to the costs of sale. It also revises various notice provisions and how excess proceeds will be distributed.

Session Law 2018-149 – Unfair Insurance Trade Practices. This law amends Subsection 626.9541(1)(m), F.S., to revise the types, value, and frequency of advertising and promotional gifts that licensed insurers or agents may give to insured or prospective insureds. It clarifies that Subsection 626.9541(h), F.S., which prohibits unlawful rebates, does not prohibit title insurers or their agents from giving to insureds, proposed insureds, or others, for the purpose of advertising, any article of merchandise having a value of not more than $25. The law became effective July 1, 2018.

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Shaping the Future

Multiple Tax Parcel Buildings and Remote Notary Legislation James (Jim) Kearn, Esq., Senior Underwriting Counsel, Winter Park, FL

MULTIPLE TAX PARCEL BUILDINGS: Session Law 2018 – 118 New Fla. Stat. §193.0237 Background Urban planners have historically focused on road networks rapidly moving commuters in and out of the Central Business District.

Tastes have been changing, however, as consumers increasingly trade a long commute for living closer to where they work, and want to be able to shop, dine, and seek entertainment in relatively closer proximity. To accommodate these new demands, especially in more densely developed urban areas, developers have increasingly built mixed-use buildings or projects. It’s common for an urban high-rise to now have retail at street level, restaurants, a gym, or other recreational facilities above retail, office space on the next levels, and residential units on the upper levels. This presented the need for infrastructure to be dedicated to those respective uses.

For example; a restaurant and hotel occupying floors three through ten have a much more critical need to own and control its own HVAC. The loss of air conditioning to a Miami restaurant and hotel for a half hour in August, is far more critical than the loss of air in the same time frame to a residential unit on the 20th floor. A single entity could own and operate all infrastructure in the building, but developers have learned efficiencies are maximized by having each separate use owned and run by experienced experts in that business or use.

Legal Obstacle to Mixed Uses One obstacle to such mixed-use development has been Florida’s tax assessment laws which assigns a single tax folio number to buildings with non-residential uses, based on a requirement that each parcel include a component of land. So, unlike condominiums which allow for separate tax folios for the individual units, one separate tax folio has historically been assigned to a mixed-use building, and all occupants had to cooperate and agree as to how to apportion the one tax bill for the entire building. The failure of one occupant to pay its share put all others at risk of a tax certificate and tax deed sale if the others didn’t cover the shortfall.

The bankruptcy of an occupant of one particular use presented additional challenges. Even when all occupants paid their share, property managers can well attest to the challenges of proper apportionment among the occupants of a high rise building, even where both the land and the vertical improvements are owned by one entity. Single parcel taxation also presented unique risks for lenders financing a single business and use in the building(e.g., a restaurant) who needed to be assured all expenses of the building are paid, so the space and use financed remained viable.

The Remedy Session Law 2018-118 was signed into law by Governor Scott on March 23, 2018, creating Fla. Stat. §193.0237, to allow for multiple parcel buildings. The law applies to assessments beginning in calendar year 2018, and to any land on which a multiple parcel building is substantially completed as of January 1 of the respective assessment year. The central new concept in this law is it allows for the issuance of a separate tax folio number, and separate taxation, of a separately described portion of a building that is on or above the same parcel of land. This law eliminates the prior requirement that any such portion of a building, such as several upper floors dedicated to commercial office space, have a land component in the folio and assessment. (This often led to gerrymandertype ‘lollipop’ descriptions to ‘tether’ the parcel to a patch of land below by a narrow shaft or steel beam that was included in the description.) The new law applies to a building that is separately owned, but which does not solely include a condominium, cooperative, or timeshare. Proponents of the law believe allowing portions of buildings to be separately owned and taxed may attract more businesses and investors which specialize in that use, who may otherwise have been dissuaded by the older, onebuilding-tax-parcel model.

First American Title’s Role Jim Kearn, Esq., Senior Underwriting Counsel in the Winter Park office of First American Title, played a key role in helping to make this law a reality. As a member of the Commercial Real Estate Subcommittee of the Real Property, Probate and Trust Law Section of The Florida Bar (RPPTL), Jim spent several months meeting or speaking with chief county property appraisers and their counsel throughout Central and North Florida to determine and catalog how each county viewed and assessed these discrete parcels under prior law. The legal interpretations of prior law and the assessment practices, varied widely across Florida’s sixty-seven counties.

Based on their research, Jim and the Commercial Real Estate Subcommittee of RPPTL recognized this law was necessary to create a new assessment category and to standardize procedures statewide to better accommodate mixed use developments.

Kudos to Jim and the Commercial Real Estate Subcommittee of the RPPTL section of The Florida Bar for their role in helping to get this law passed!

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Shaping the Future

Multiple Tax Parcel Buildings and Remote Notary Legislation REMOTE NOTARY LEGISLATION IN FLORIDA House Bill 771 and Senate Bill 1042 were introduced in the recently concluded 2018 Florida legislative session to authorize remote notarizations, which allow the principal, the witnesses and the notary public to all be in different locations, so long as they all can see and hear one another in real time using audio-video communication technology.

First American Title played key roles in improving the bills by building consensus regarding provisions to include which would protect the title industry and the general public. The bills, as originally introduced, raised several concerns. They provided for universal recognition of all out-of-state remote notaries, and for automatic validation of all notarial acts upon recording, including notarial acts performed by out-of-state remote notaries. If passed, it would validate the lower standards of other states and undercut Florida’s notary standards, resulting in the potential increase risk of fraud. Other issues concerned the types of technology to be used, the identifications required, and the method for validating such identifications, remotely.

John LaJoie, VP, Corporate Senior Operations Counsel, Len Prescott, VP, Florida State and Regional Counsel, and Jennifer Bloodworth, Sr. Underwriting Counsel, reviewed the bills and furnished suggestions for improvement.

Jennifer was the point person for First American Title advocating improvements in several meetings and conferences to key players (RPPTL, Florida Land Title Association, legislative liaisons) involved with the legislation from December 2017 through March 2018.

Her efforts proved fruitful as several suggested improvements were accepted and incorporated in subsequent revisions adopted in Florida House and Senate committees which approved the bills.

The bills did not become law, and will be introduced again in future legislative sessions. Kudos to Jennifer Bloodworth, John Lajoie, and Len Prescott for improving the bill and raising the bar on an issue that is critical to our industry.

Upcoming Holidays Our offices will be closed on the following dates:

Thursday, November 22, 2018

THANKSGIVING DAY Friday, November 23, 2018

THANKSGIVING DAY HOLIDAY Tuesday, December 25, 2018

CHRISTMAS DAY

First American Title | Florida Legal Eagle | Volume VII

Page 15

PACE Liens, HERO Assessments, and other Complications Chip Koval, Esq., Underwriting Counsel, Gainesville, FL Len Prescott, Esq., VP, Florida State and Regional Counsel, Coral Gables, FL

Property Assessed Clean Energy (PACE) and Home Energy Renovation Opportunity (HERO) programs provide residential and commercial property owners access to financing for energy efficiency upgrades and renewable energy system installations. These programs use bond financing to fund the improvements, which are then repaid over time by the property owner(s) as an assessment on their property tax bill.

These voluntary assessments can extend for up to 30 years and, if unpaid, constitute a lien on the benefitted property that would have priority over present and future mortgages.1 Title examiners often encounter PACE/HERO assessments recorded in public records and are sometimes unsure of how to address them. The recorded Notice may not include PACE or HERO in the title or body but will denote improvements for energy efficiency or renewable energy. Assessments will eventually show in the taxes, but in many cases these assessments don’t appear in the tax information available.

Uncertainty and complications increased in December 2017, when the Federal Housing Administration (FHA) announced it would no longer approve mortgages encumbered by PACE/HERO assessments. FHA’s concern was that these assessments would take a first lien position, and a default under the program could jeopardize property ownership.

For these same reasons, First American Title changed its underwriting regarding these programs in Florida requiring both a requirement for payment and exception when a First American office produces a commitment or AgentNet ® Search Product (ASP).

The existence of these program assessments could make it difficult to sell affected property. Recently, one of our examiners in Tampa received a contract from an agent who was a friend of the seller. The seller disclosed to the agent they had made improvements to the property funded through PACE. The seller was happy the balance of the assessment would not need to be paid off, and their net proceeds from the sale would not be reduced, since the standard Florida Realtors/Florida Bar Residential Contract for Sale and Purchase provides the seller pays assessments due prior to closing, and the buyer pays assessments due after closing.

1

Florida program established pursuant to FS Section 163.08.

2

See §163.08(14), F.S.

3

See §163.08(8), F.S.

First American Title | Florida Legal Eagle | Volume VII

In this instance, the PACE improvements were completed in 2017. Only the 2016 tax bill was available when information was gathered for completion of the Loan Estimate and Closing Disclosure which made no mention of the PACE assessments. The 2017 tax bill included the PACE assessment showing taxes increasing by $987.46 for the next 20 years, well beyond the useful life of the energy efficient air conditioning unit that was acquired through the program.

In compliance with the FHA notice, the lender stated the PACE assessment needed to be paid in full as a condition of funding the buyer’s loan. The seller refused to pay based on the representations of the PACE contractor that the payments encumbered only the land and were not a personal debt, and the terms of the contract made the buyer responsible for all post-closing assessments. The deal fell apart.

This has become yet another complication for settlement agents. We’ve also seen a number of transactions where the closing agent received complaints from purchasers claiming they were not properly made aware of the additional assessments. In Florida, sellers are required to disclose, in writing, to a prospective purchaser any unpaid assessments where a non-ad valorem assessment has been levied.2 What happens when the seller does not make this disclosure?

What precautions can an agent take to avoid angering a customer? Many lenders have begun requiring the escrow of PACE/HERO assessments in their closing instructions, as they do for real property taxes. It is important to carefully review the exceptions identified in the search and understand the implications of these filings. In Florida, PACE/HERO agreements, or memorandum of such agreements, must be recorded by the sponsoring unit of local government within 5 days after execution. The recording of such notice provides “constructive notice that the assessment to be levied on the property constitutes a lien of equal dignity to county taxes and assessments from the date of recordation.”3 View communities participating in PACE: www.floridapace.gov/participating-communities

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CASE LAW UPDATES

Foreclosure – Standing Assignee Mortgagee had no standing to foreclose where it failed to establish that its assignor was the legal successor in interest to the original lender. Arcuri v. HSBC USA National Association, as Trustee, No. 2D164201 (Fla. 2d DCA Mar. 2, 2018) https://www. leagle.com/decision/inflco20180302166

Genuine issue of material fact exists regarding standing, to prevent summary judgment where the complaint contained a Note with an undated endorsement in blank, but the subsequent amended complaint contained another undated endorsement to a specific mortgage corporation. Russell v. BAC Home Loan Servicing, LP, No. 4D16-3908 (Fla. 4th DCA Feb. 28, 2018) https://www.leagle. com/decision/inflco20171129192 A non-holder in possession of a Note does not acquire the rights of a holder and have standing to foreclose without proving the chain of transfers to itself from the first holder of the note. Supria v. Goshen Mortgage, LLC, et al., Case No. 4D16-4356 (Fla. 4th DCA Dec. 6, 2017) https://www.leagle.com/decision/ inflco20171206162 Lis Pendens – Section 48.23(1)(d), Florida Statues, only precludes enforcement of liens unrecorded at the time a lis pendens is recorded. It does not bar a first mortgagee from filing a foreclosure action or deprive the court of jurisdiction thereof, when such action was filed after the homeowners’ association filed a foreclosure action and lis pendens, which was subsequent to the recording of the first mortgage. Ditech Financial LLC v.

White, Case No. 4D16-3213 (Fla. 4th DCA July 26, 2017) https://www.leagle.com/decision/ inflco20170726144 Statute of Limitations Foreclosure filed more than five years after mortgagor’s first default is timely regarding continuing defaults, but final judgment must exclude defaults preceding the 5 year statute of limitations period. Velden v. Nationstar Mortgage, LLC, Case No. 5D16-3628 (Fla. 5th DCA Jan. 12, 2018) https://www.leagle.com/ decision/inflco20180112199 Statute of Limitations for deficiency judgments commences to run from the date of the foreclosure sale. Dyck-O’Neal, Inc. v.

Germany, et al., Case No. 5D17-1059 (Fla. 5th DCA Feb. 23, 2018) https://www.leagle.com/ decision/inflco20180223196

Legal Description Errors – Final Summary Judgment of Foreclosure was sufficient where property was identified by street address, parcel ID, and metes and bounds description, and error was in the degree symbols. (Legal description erroneously listed border/vector as N. 8526’03” W) Bayview Loan Servicing, LLC v. Newell, Case No. 1D16-5173 (Fla. 1st DCA Dec. 6, 2017) https://www.leagle.com/decision/ inflco20171206165 Easement and Policy Exceptions – An easement was sufficiently disclosed and excepted in a title policy where the policy listed an abstract which referred to a certificate of survey which provided information on the easement. Parks v. Stewart Title Guaranty Co., - Case No. DA 17-0336 (Montana. Jan. 3, 2018) https://www.leagle.com/decision/ inmtco20180228383

Easement by Necessity – Townhome unit owners, who had right to use portion of dock that served several townhomes, did not have right of access to it over another unit owner’s land, by necessity, absent showing of absolute necessity, since other units also had waterfront access and could build own access to the dock.

Goldman et. al., v. Lustig, No. 4D16-1933 (Fla. 4th DCA Jan. 24, 2018). https://www.leagle.com/ decision/inflco20180124155 Negligent Misrepresentation – Genuine issues of material fact exist to prevent entry of summary judgment in favor of board certified real estate attorney alleged to have committed either a fraudulent or negligent misrepresentation or a fraudulent or negligent concealment by falsely assuring the listing real estate agent that no buyer’s-side real estate broker commission would be payable in the transaction. Grimes v. Lottes, No. 2D16-5557 (Fla. 2d DCA Feb. 9, 2018). https:// www.leagle.com/decision/inflco20180209163 Condominium Restrictive Covenants / Adjacent Land – Condominium unit owners and association had standing to enforce restrictions in lease on adjacent land, where i) underlying ground lease included the land on which the condominium was built and the adjacent land and ii) lease was incorporated into the condominium documents. Waterview Towers Condo. Assoc., Inc., et. al. v. City of West Palm Beach, et. al., No. 4D16-285 (Fla. 4d DCA Nov. 1, 2017) https://www.leagle.com/decision/ inflco20180307207 Condominium Appurtenances – Beach club memberships, defined in the condominium

First American Title | Florida Legal Eagle | Volume VII

declaration to be an appurtenance to each unit, in a beach club a mile away, were not appurtenances since i) the beach club was owned by a separate corporation; ii) was never to be turned over to the master condominium association, and iii) was available to the general public. Silver Beach Towers Property Owners Association, Inc. v. Silver Beach Investments of Destin, LLC, Case No. 1D16-4555 (Fla. 1st DCA October 18, 2017) https://www.leagle.com/ decision/inflco20170221273 Tax Lien Priority / Homestead Improperly Granted – Where homestead exemption was improperly granted and resulted in a homestead tax lien recorded seven years after first mortgage was recorded, such homestead tax lien had priority over first mortgage under Fla. Stat. §197.122(1) Miami-Dade County v.

Lansdowne Mortgage, LLC, Case No. 3D161046 (Fla. 3d DCA October 18, 2017) https:// www.leagle.com/decision/inflco20171024288 Littoral Rights and Lake Views – Lakefront owners have several special common law littoral rights which include the right to a view of the lake which, when obstructed by a dock, is actionable and compensable. HagertySmith, LLC v. Gerlander, Case No. 5D16-3655 (Fla. 5th DCA October 20, 2017) https://www.leagle.com/ decision/inflco20171021250 Reformation / Statute of Limitations – The 20year statute of limitations in Fla. Stat. §95.231(2) bars actions “against the claimants under the deed…or their successors in title,” and not those who are successors in title who seek to reform the deed in conformance with and not adverse to the interests of the claimants under the deeds. Pettis v. Chrisentery, No. 1D17-506 (Fla. 1st DCA Oct. 24, 2017) https://www.leagle. com/decision/inflco20171024341 Contract Breach / Election of Remedies/ Damages & Specific Performance – Successful motion for summary judgment for breach of contract and damage claim does not estop contract purchaser from later electing to pursue specific performance. Only full satisfaction of damage claim estops contract purchaser from pursuing specific performance claim where remedies sought are based on the same set of facts and are consistent. The Allegro at Boynton Beach, L.L.C. v. Pearson, No. 4D16-4299 (Fla. 4th DCA Oct. 25, 2017) https://www.leagle.com/ decision/inflco20171025243 The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice.

Readers should not act upon this without seeking advice from professional advisers.

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Underwriting Spotlight:

Jim Kearn Senior Underwriter Counsel Q

WHERE DID YOU WORK PRIOR TO COMING TO FIRST AMERICAN TITLE?

A

I started with a national law firm based in Pittsburgh, my hometown, where I represented locally-based national lenders and developers, doing their lending and development work throughout Florida. Once introduced to the Florida sand between my toes, it was hard to go back, so I accepted a position with a statewide firm in Central Florida in 1986. Years later, I started my own firm serving Central and North Florida focusing on real estate, zoning and land use, and real estate-related litigation.

over six hundred parcels to widen the 10.2 mile centuryold trolley right-of-way, from the South Hills to the City of Pittsburgh, in order to build the first leg of a new subway.

We had to describe and close on three-dimensional underground tunnels, air ‘envelopes’ over the rivers for bridges, and snake the subway right-of-way between pilings for sixty-story skyscrapers, using plats and deeds from the 1750s when Pittsburgh was incorporated. It was a high profile, fascinating, truly big deal that had a pulse and excitement. The experience led to my accepting a position with a Florida firm who represented the Daytona Redevelopment Authority, where I assembled and cleared title on the Ocean Center and Hilton Hotel complex on Daytona Beach, in addition to other large public projects throughout the state.

After 25 years in private practice, I accepted a position with a national underwriter where my duties, in addition to underwriting, included revamping and presenting over 210 three-hour seminars from Pensacola to Key West. Along my travels, I met over 4,000 agents which led to my promotion to AVP, Manager of Commercial Services and Underwriting statewide. Since I’m still a member of the Pennsylvania Bar and went to law school in New York, I also assisted with national title operations out of Manhattan.

Q A

I’ve always enjoyed real estate practice because it’s constructive. Whether transactions involve HUD, Industrial Development Bonds, special improvement districts, DRIs, CDCs, or resorts, real estate builds the future and our quality of life, title insurance is the linchpin in the process.

In September 2017, I joined First American Title.

Q

TELL US ABOUT THE EMPLOYEE CULTURE IN YOUR OFFICE.

WHAT BROUGHT YOU TO FIRST AMERICAN?

A

I occasionally work out of the Winter Park office, which is friendly, professional and upbeat. Everyone is willing to lend a hand and people take their work, but not themselves, seriously.

The underwriting team at First American Title is simply the best; their knowledge and experience with the law is second to none. But unlike other underwriters, First American Title balances those attributes with reasonableness, pragmatism, and an infectious can-do spirit, to get transactions closed. Based on my tenure with other underwriters, and decades of practicing in Florida, I repeatedly saw deals underwriters wouldn’t, or couldn’t, close, ultimately closed by First American. That doesn’t happen by chance; it was the product of the leadership of Len Prescott and Alan McCall, whom I’ve known and respected for years. In 2017, I reached out to First American Title, one thing lead to another, and I’m glad they’ve given me a great opportunity to serve on this positive, winning team.

Q

WHAT MADE YOU WANT TO WORK IN THE TITLE INDUSTRY?

A

I love history and loved real estate in law school. The real estate textbook had pictures and drawings; it was a refreshing break from studying the U.S. Tax Code and Federal Rules of Civil Procedure. The summer following my first year of law school, I worked in the real estate division of the Pittsburgh subway authority. Our task was to close

First American Title | Florida Legal Eagle | Volume VII

I also work remotely from my home office in Port Orange, where I could and should be more cultured.

Q

TELL US SOMETHING THAT NOT MANY PEOPLE KNOW ABOUT YOU.

A

I worked my way through a high school as a janitor, then through college as a steelworker. I was a drummer in high school and college and enjoy all genres of music. It was also my privilege to work with the late Senator H.J. Heinz, III in his Capitol Hill office for two years.

I enjoy sports and played basketball in both high school and college. The lessons learned from playing organized sports were as valuable as the classroom lessons on succeeding in law and business; i.e., learning the importance of focus, discipline, perseverance, taking criticism, shaking-off setbacks, and sublimating oneself for the greater good of the team.

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Underwriting Spotlight:

Ed Hamann Senior Underwriter Counsel Q

WHERE DID YOU WORK PRIOR TO COMING TO FIRST AMERICAN TITLE?

Q

TELL US ABOUT THE EMPLOYEE CULTURE IN YOUR OFFICE.

A

Prior to joining First American Title, I served as VP, Chief International Underwriting Counsel, and Florida State Underwriting Counsel for several national underwriters.

In these roles, I handled all underwriting aspects of commercial and residential projects both domestically and internationally.

A

I am physically located in the Winter Park office, but work with many underwriters throughout the state. The employees have a strong commitment to customer service, but equally as strong is a sense of teamwork and mutual support.

Q A

WHAT BROUGHT YOU TO FIRST AMERICAN?

Q

TELL US SOMETHING THAT NOT MANY PEOPLE KNOW ABOUT YOU.

A

Spanish is my native tongue and I speak, read and write the language as fluently as English. This has allowed me to work on sophisticated commercial title insurance transactions from all over the world. I have been the primary underwriter on trophy hotel and commercial properties in: Aruba, Anguilla, Bahamas, Brazil, Cayman Islands, Costa Rica, Chile, Dominican Republic, Mexico, Panama and Western Europe. It is exciting for me to bring that world view back to Florida underwriting.

I could say it was the 1978 hit song Reunited by Peaches and Herb. I am kidding; Len Prescott and I share a significant common history in our professional lives having worked together in several jobs with other national underwriters and we have mutual respect for each other. When changes in the appetite for international title insurance turned sour, Len and First American Title approached me with an exciting vision of joining the sophisticated and collaborative Florida underwriting team.

How could I resist being Reunited to be part of bringing that vision to the market.

Q

WHAT MADE YOU WANT TO WORK IN THE TITLE INDUSTRY?

A

I stumbled into title insurance through a former roommate in law school. My first two and a half years after law school were spent in private practice doing litigation in the area of Worker’s Compensation Defense and Community Association Law. I quickly figured out I did not enjoy litigation. My friend was working as a real estate attorney in a large Miami law firm and he introduced me to a large title insurance underwriter with a need for a commercial examiner. I was hired, and when I found out what I would be doing, I was hooked almost immediately. The excitement and challenge of working the commercial deals and finding creative solutions to complex problems has never gone away. It has only increased throughout the years, despite the intense real estate cycles the industry has experienced since I started in 2003.

First American Title | Florida Legal Eagle | Volume VII

I love underwriting, but what I love most (other than my family), is taking long bike rides on the many trails throughout Central Florida; a 30-40 mile bike ride is my favorite way to spend Saturday morning. My goal is to someday participate in the annual 72 Hours to Key West charity bike event that leaves Fort Myers on a Friday morning in November, arriving in Key West midday on Sunday – over 280 miles in three days. You can call me crazy!!

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FIRST AMERICAN TITLE

FLORIDA STATE COUNSEL

UNDERWRITING TEAM REGIONAL AND STATE UNDERWRITING COUNSEL TEAM Alan McCall VP, SE Division Underwriting Counsel D: 407.618.7935 M: 407.312.9132 amccall@firstam.com

Len Prescott VP, Florida State and Regional Counsel D: 305.908.6252 M: 305.900.8427 lprescott@firstam.com

John Balberchak Sr. Underwriter D: 850.296.3084 M: 850.445.9323 jbalberchak@firstam.com

Greg Blomeley VP, Underwriter D: 407.691.5210 M: 850.445.9320 | O: 407.691.5200 gblomeley@firstam.com Rapid Response Team Member

Jennifer Bloodworth Sr. Underwriting Counsel Winter Park: 407.691.5296 Sunrise: 954.839.2959 M: 407.790.2057 jbloodworth@firstam.com

Bill Boyce Sr. Underwriting Counsel D: 727.549.3312 M: 727.501.3454 wboyce@firstam.com Rapid Response Team Member

Ed Hamann Sr. Underwriting Counsel D: 407.691.5223 M: 321.331.5469 ehamann@firstam.com

James (Jim) Kearn Sr. Underwriting Counsel D: 407.691.5277 M: 407.840.9226 jkearn@firstam.com Rapid Response Team Member

Chip Koval Underwriting Counsel D: 352.415.4765 M: 352.240.2519 ckoval@firstam.com Rapid Response Team Member

Pat Newton Sr. Underwriting Counsel D: 239.330.3328 M: 239.272.1856 pnewton@firstam.com

David Roberts Sr. Underwriter Largo: 727.549.3429 Tampa: 813.261.5580 daroberts@firstam.com

Joe Teichert Underwriting Counsel D: 904.858.9206 M: 904.832.0615 jteichert@firstam.com Rapid Response Team Member

W. Wade Wallace Underwriting Counsel D: 239.676.3747 M: 239.961.2110 wawallace@firstam.com Rapid Response Team Member

Sherri Wedesky Underwriter D: 850.296.3170 M: 850.766.7792 swedesky@firstam.com

First American Title | Florida Legal Eagle | Volume VII

Rapid Response Team D: 866.728.5207

FloridaUW@firstam.com

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FIRST AMERICAN TITLE

RAPID RESPONSE TEAM Team Members

GREG BLOMELEY VP, Underwriter Winter Park, FL

JIM KEARN

Sr. Underwriting Counsel Winter Park, FL

The Florida Underwriting Department of First American Title is very proud of our Rapid Response Team. We understand that time is of the essence when working on real estate transactions, and a quick response from our underwriting department may be necessary to keep transactions on track, even when the need arises after normal business hours.

BILL BOYCE

Sr. Underwriting Counsel Tampa Bay, FL

CHIP KOVAL

The Rapid Response Team shares one email address (FloridaUW@firstam.com) and one phone number (866.728.5207). Utilizing this communication method saves agents time and eliminates the need to make multiple telephone calls or send multiple emails if their preferred underwriter is unavailable.

The quality and responsiveness of the Rapid Response Team increases our speed of service and allows us to provide timely underwriting support and assistance to our loyal and valued agents.

Underwriting Counsel Gainesville, FL

866.728.5207 FloridaUW@firstam.com

JOE TEICHERT

Underwriting Counsel Jacksonville, FL

WADE WALLACE

Underwriting Counsel Estero, FL

First American Title | Florida Legal Eagle | Volume VII

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