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

2. CONTINUATION OF INSURANCE

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

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

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

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

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

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

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

If you are a lender in North or Central Florida that needs legal advice regarding real estate issues, please contact Bogin, Munns, & Munns, P.A. to schedule a consultation. The attorneys at Bogin, Munns & Munns, P.A. have significant experience in representing lenders who own properties with title defects, and we would be happy to assist your bank as well. Often, our fees for fixing title defects are paid from a title policy claim. Please call us at (352) 332-7688 in Gainesville and (407) 578-1334 in Orlando.

– Zana Dupee, Esq., is an experienced attorney with Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  Mrs. Dupee works out of the Gainesville office of the firm and welcomes questions and comments regarding the above and can be reached at zdupee@boginmunns.com

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

The dirt road has probably been there for many decades …as long as people can remember.  It may even be on their survey from when they bought the property … or from when they subdivided the property … or from when they did their land-home package to buy their mobile home.  There might even be a description of the road included in the legal description of their property on their old deed or mortgage.

So, how can there still be a title problem?  What if the property appraiser or the court house says it’s OK?  Is there still a problem?

Yes, there may still be a problem.  None of the things listed above actually gives you a legal right to use a private road.  An owner of the land that you are driving over must have signed an “Easement” and recorded it in the public records in order for you to have the legal right to cross that property.

People always point out that there is a Florida statute that makes it illegal to landlock property.  Or they point out that they could have acquired a right to use the road simply by using it all these years.  These are both true; however, to rely on these legal rights for title purposes, you have to go to court and get a court order from a judge ruling that you have the legal right to use the private road.  So, unless you have a signed court order, that statute or your prior use doesn’t really help.

To ensure that you don’t have this problem when you go to sell property, consult with a real estate attorney who can do a title search to determine if you have the legal right to use your private road.  The real estate attorneys at Bogin, Munns & Munns, P.A. can help with matters relating to private roads and easements.  Call Bogin, Munns & Munns, P.A. at (407) 578-1334 to schedule a consultation with a qualified real estate attorney today.

– Zana Dupee, Esq., is an experienced attorney with Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  Mrs. Dupee works out of the Gainesville office of the firm and welcomes questions and comments regarding the above and can be reached at zdupee@boginmunns.com

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