Be Thankful You Don’t Receive a Fowl Title Objection Notice

It seems almost obvious, only a plucked turkey would buy property without having a title search conducted to determine if a Thanksgiving feast is in the making, that is to say “title is clear”, or if there are title defects that would render the property unmarketable. This right is provided under the terms and provisions of both the “AS IS” and the “Standard” FR/BAR Contracts* under section 18. STANDARDS: A. TITLE (ii) TITLE EXAMINATION.

A “Buyer shall have 5 days after receipt of Title Commitment to examine it and notify Seller in writing specifying defect(s), if any, that render title unmarketable.” This writing is what is commonly referred to as a “Title Objection Notice”. The Title Objection Notice puts the seller on notice of a defect in the title to the subject property to which the buyer objects, and if not corrected (“cured”), by the seller, may permit the buyer to terminate the contract.

One of the very first things that we do as the title agent is gobble up a title search and commitment from our title insurance underwriter (the company that is going to insure the title to the property). The title commitment is going to reveal the “state of the title” to the property. It will inform us whether there are any title issues (defects) that need to be addressed in order for the title insurance company to agree to insure the title to the property. Upon our review of the title commitment (and accompanying smorgasbord of support documents), if there are any defects or clouds on title that would, if unresolved, render the title to the property unmarketable, we need to put the party responsible for the title defect or cloud (typically the seller), on actual notice of the defect(s). There are strict time constraints on the buyer (and consequently the buyer’s title agent), to complete the title search and notify the seller of the outcome.

Typically, the buyer will have 15 days prior to the Closing Date (the “Title Evidence Deadline”) in which to complete a title search and have a title commitment issued by a licensed title insurer (NOTE: the actual timing of the Title Evidence Deadline will vary from contract to contract depending on the agreed upon number of days, the closing date, and whether the buyer is a cash buyer or a financed buyer – refer to section 9(c) of either contract). Once the buyer receives the Title Commitment, the buyer then has 5 days to examine it and notify the seller of any perceived defect(s). If the buyer fails to so notify the seller, the buyer is deemed to have accepted the title as it then is. If the objection is not timely raised, it is lost forever. This is particularly important when the purchase is being financed. Where a buyer may not find a title defect objectionable, the buyer’s lender will not likely lend on a property with a title defect. If the right to object is lost, the buyer may be forced to buy notwithstanding that the lender will not lend. If the buyer cannot close with cash, the buyer’s deposit will be at risk.

Sellers too must be extremely mindful that a Title Objection Notice not be ignored, but given immediate attention. The seller has 30 days from delivery of the Title Objection Notice to take reasonable diligent efforts to clear the objection(s). It is the seller’s obligation to clear the objection(s) and cure the defect(s). This 30 day period is defined in both contracts as the “Cure Period”. If there is one or more title defect(s), the seller must use this time to cure the defect(s) and clear the objection(s). If the seller ignores the Title Objection Notice and fails to clear the objection(s), the buyer may terminate the contract as a matter of right.

During the Cure Period, all parties (buyer, seller, and agents), should be aware that the Closing Date established in Section 4 of the contract, is likely to change (moved further out). Depending on the specifics of a contract, if a seller uses the bulk, if not all, of the 30 day Cure Period, the Closing Date may change. The transaction might still close on the Closing Date; however, if the Closing Date has passed, then Closing will be within 10 days after the buyer has received the seller’s notice that the defect(s) have been cured. Worse still, if the seller is unable (or unwilling) to cure the defect(s) within the Cure Period, then the buyer may elect to extend the Cure Period by as much as 120 days, preventing the seller from withdrawing from the contract. Conversely, a buyer is not obligated to extend the Cure Period and could cancel the Contract and receive a refund of the deposit at the end of the Cure Period if the issue is not resolved. The buyer can also elect to accept the defected title, or elect to terminate the contract.

The prudent course, under circumstances where there is any suggestion of a bad bird (title defect), is to act immediately to address the Title Objection Notice. There is nothing worse than being called late to dinner; the sooner the defect(s) are investigated, the sooner they can be cleared to the satisfaction of all parties. No one wants the indignity of being put at the kids table, should you have any questions with regard to a Title Objection Notice – be it from a buyer, seller, or agent, we urge you to go to the head table and contact one of the attorneys at Berlin Patten Ebling, or consult with your local real estate attorney, for additional guidance.

* the FR/BAR Residential Contract For Sale and Purchase, and the “AS IS” Residential Contract For Sale and Purchase (approved by The Florida Realtors and The Florida Bar, version (6/19))
Berlin Patten Ebling, PLLC
Article Authored by Mark C. Hanewich, ESQ.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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