Another example of, I think, a good reason to get us involved early is with your title insurance and a survey as well. Title insurance and a survey review sort of go hand-in-hand. I think other people have talked about that and maybe I’ll talk about that a little more later… You absolutely need to make sure you understand the title to the property and make sure that you’re going to get an acceptable title insurance policy.
There are no two titles to real estate in Florida that are identical. They’re all different in some way. And I think other attorneys have talked a little bit about title insurance policies specifically but, in terms of starting that review up front, a lot of contracts (at least the forms) will require that the title commitment, or the title, will be given to a buyer 5 or 10 days prior to closing. Well you could already be $50, $100 thousand of costs into your review and your analysis of a commercial property before you get that title.
Typically your contract is going to have a provision that says if it’s something that makes the title unmarketable (and that’s an entire body of law) that you can term the contract and you can get your money back. Now, that can be negotiated, absolutely, in a commercial contract but what’s more, is, you can have a title issue that does not make the title unmarketable, but it makes it *unfeasible* for your purposes, for your intentions. And we had a client that had this very issue.
This client asked the attorney at our firm to do very minimal due diligence. Didn’t want the attorney involved, you know sort of, the whole way. Only wanted the attorney to step in at the end and, you know just, “Just review.” You know… that the title commitment… and just make sure everything’s OK.
The problem was everything was *not* OK. It wasn’t a matter of a misrepresentation by the seller because in a commercial contract you have a contract that’s negotiated, the seller had not misrepresented according to the provisions of the contract. It was a title issue that made our client’s project unfeasible. The problem is he had already agreed to let $50,000 go hard and become nonrefundable.
There are no two titles to real estate in Florida that are identical. They’re all different in some way.
So, had he come to us and had us review the title, and had we been able to negotiate in the contract to get the title early on, could have done that review during the due diligence period when the money is fully refundable and at the beginning before he’s investing in engineering and consulting fees.
So again, have your attorney involved at the beginning. If you’re worried about costs, just say that. Say that to me. And I’ll say ok, let’s figure out a budget and let’s figure out who’s going to do what.
– Spencer R. Munns is an experienced real estate attorney and shareholder with the law firm of Bogin, Munns, & Munns, a full service law firm with offices in Orlando, Clermont, Kissimmee, Orange City, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida. He welcomes questions and comments regarding the above and can be reached at [email protected]
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