In past decades most residential real estate transaction closings were handled solely by an attorney who provided, as part of the closing, an Attorney’s Opinion of Title. The advent of title insurance changed the way real estate closings work. While attorneys may become agents of various title insurance underwriters, a new title insurance industry, separate from attorneys, was formed in many states including Florida.
For an attorney’s opinion of title, the attorney examines the recorded documents included in the chain of title and issues a “Statement of Opinion.” The Statement of Opinion outlines the details of the attorney’s search, records examined, and what encumbrances exist against the title. The attorney’s opinion of title is not insurance against undisclosed defects, nor does it ensure marketable title. This method remains a common practice in several states; however, in Florida, the issuance of title insurance has become the norm in most residential real estate transactions. Florida does not require title insurance for real estate transactions. There are instances, such as a transfer by court order in a probate proceeding, when the party taking title receives neither a Statement of Opinion nor a title insurance policy.
In Florida, title insurance has almost wholly displaced an attorney’s title opinion as a means of assuring good title. Title insurance provides the buyer more protection. It offers better financial backing to the insured than an attorney or law firm. Also, title insurance covers a broader range of possible title problems than an Opinion Statement. Some of these include the existence of forged documents, transfer by incompetent parties, and fraud, among others. The attorney’s opinion is based only on a review of the abstract of the chain of title where such defects are not evident. As a result, the Statement of Opinion cannot guarantee that such problems will not arise in the future.
Title insurance led to the creation of the title insurance industry. In Florida, a title company must have at least one licensed Florida Title Agent. To become a licensed title agent, one must complete either a 40-Hour Title Agent Course or have worked for a least one year out of the previous four years providing “responsible title duties.” Also, they must pass the state exam. Florida attorneys who are members in good standing of the Florida Bar are exempt from licensing. Attorneys who offer title insurance are often members of The Fund a division of Old Republic Title. The Fund provides title insurance underwriting to attorneys and attorney owned title agencies.
Title insurance companies do more than prepare seller and lender title insurance policies. They also prepare the closing documents, hold escrowed funds, perform the closing, and distribute the funds after closing. Florida Department of Financial Services set title insurance rates so that they are consistent from one title agency to another. The fees for additional closing and title related services are not regulated and can vary significantly from agency to agency. Real estate agents often recommend a title agency to their seller clients. Sellers should, however, compare those with other title agencies, research their reputation online.
Title agencies may provide title insurance and perform closings; however, they do not provide legal advice, opinions, or other attorney services. Likewise, licensed real estate brokers and real estate agents may not offer their customers or clients with a legal interpretation of documents or advise or give opinions about the buyer’s or seller’s legal rights and responsibilities under a contract and to do so is a third-degree felony under Florida law. In other words, the advantages of title insurance over an attorney’s statement of opinion is not a replacement for an attorney’s legal advice and representation in a real estate transaction.
Beyond reviewing the title abstract Attorneys also advise their clients on the obligations of third parties such as brokers, real estate agents, and title agents, the implication of various agreements such as broker listing agreements, contracts, and disclosures. Attorneys also advise clients regarding the terms and formation of contracts and whether contract documents are properly completed and are legally sufficient. They explain the conveyance process, review and explain title abstracts and title commitments, closing, and settlement documents. Attorneys recognize potential problems and explain the consequences of default, the possible future liabilities of the client, other parties to the contract, and third parties such as brokers, agents, inspectors, and title companies. An attorney’s role in a real estate transaction begins before signing a contract, continues through the entire process and, if necessary, beyond default or closing if disputes arise.
In closing, title insurance is beneficial for buyers, sellers, and lenders. Title insurance provides greater financial security and protects against a broader range of possible problems than an attorney’s Statement of Opinion. A good title insurance company streamlines the transaction process. However, Title insurance, title agencies, real estate brokers, and real estate agents, no matter how experienced, do not replace the need to have competent legal representation at all stages of the transaction.