Chapter 9: Title, Deeds, and Ownership Restrictions

Question 1

Legal Title

Answer 1

Title means ownership. When a party owns property, he or she has legal title to it. Legal title is an ownership interest that’s enforceable by law. Title to real property is the ownership of specified rights in property that forms an estate. The type of estate, as we have seen, is based on all, or specified portions of, the bundle of rights that include possession, disposition, enjoyment, exclusion, and control.

Question 2

Equitable Title

Answer 2

Is the right to gain ownership interest in the future. Equitable title effectively confers a financial or “equitable” interest in a property.

Question 3

Clear Title

Answer 3

Marketable, merchantable, or clear title to real property is title in fee simple that is free from litigation and defects, which enables an owner to hold it in peace or sell it to a person of reasonable prudence for its fair market value. There is no such thing as proof of good title to property; there is only evidence to support the claim.

Question 4

Title Defects (Cloud on Title)

Answer 4

Are any claims or other factors that could cause the title to a property to be declared invalid. The title defect can be any issue that causes the current title to be questioned including: failure to comply with local real estate documents laws, or the discovery of other claims or liens on the property that were not acknowledged at the time the deed was issued.

Question 5

Actual vs. Constructive Notice

Answer 5

A party entitled to the ownership of property must be able to show he or she has acquired such right, or risk losing the property to another claimant. An owner must be able to provide evidence of ownership. Brokers should advise parties they deal with in a transaction to immediately record any documents associated with the transaction that could affect title. The two methods that may be used to provide evidence of ownership are actual notice and constructive notice

Question 6

Actual Notice

Answer 6

actual notice of ownership is provided by physical possession. There is validity in the saying “possession is nine-tenths of the law.” Being in possession of property and claiming ownership is called actual notice. A party who has been shown a deed also has been given actual notice. Actual notice can be either expressed or implied.

Question 7

Constructive Notice

Answer 7

Constructive Notice also called legal notice, is achieved by recording documents in the public records. Recording a document has the same legal effect as showing it to the entire world. Documents are recorded in the Office of the Clerk of the circuit court in the county where the property is located.

Question 8

Although actual and constructive notice have the same legal priority

Answer 8

recording an instrument in the public records may be easier to prove; therefore, constructive notice is the best evidence of ownership.

Question 9

Root of Title

Answer 9

To ascertain whether or not title is good and merchantable, the record of ownership must be traced back for a period of time necessary to assure that no outstanding or unresolved claims exist against the title. The time period at which this assertion can be made is called the root of title.

In Florida, the root of title extends back 30 years from the recording of the claim, as specified in the Marketable Record Titles to Real Property Act (MARTA). Claims more than 30 years old are extinguished.

Property ownership rights may be traced back to a land grant from the state or federal government, or from a land grant given by the king of Spain.

Question 10

Chain of Title

Answer 10

Is created by a search of the public records that results in a timeline of recorded documents that links all past owners of a parcel of land from the root of title to the present day. Also contained in the public records are other documents such as mortgages, judgments, divorces, deaths, births, tax liens, and other documents that may have an effect on the title to property.

Question 11

Title Plant

Answer 11

Abstracting and title insurance companies compile copies of the documents from the public records into a title plant. The title plant contains all documents that pertain to real estate and is arranged according to the date of recording in the public records.

Question 12

Title Search

Answer 12

Since many different types of documents may affect the title to property, a search of all such documents must be made. Notations are made regarding any documents that could effect the title.

Question 13

Abstract

Answer 13

In some cases, it may be desirable to have copies made of all documents that have an effect on the title to the property that is investigated. These can then be assembled in date order and placed in a binder. A cover page that identifies the property is called the caption, or caption page. When complied in this fashion, it is called an abstract. The chain of the title located in the abstract is a timeline of the recorded documents used to transfer title from one owner to the next.

Question 14

Abstract Update

Answer 14

Since an abstract ends at a certain point in time, it may become necessary in the future to obtain more current information about the property. An update is a newer version of a prior abstract.
Using a prior abstract as a basis, starting from the last date of the last document, an abstractor copies all documents of record since that date to bring the original abstract current.

Question 15

Attorney’s Opinion of Title

Answer 15

The abstract can be considered a history of the title to the property. In and of itself an abstract is useless. Unless an attorney who is experienced in land titles reviews the abstract and forms a legal opinion as to the quality of title, the abstract has little value.
When an attorney conducts such a review and renders a written opinion, it is called an opinion of title. It is not guarantee of good title. The opinion of title is only the attorney’s opinion, and that opinion could prove to be faulty. A lawsuit against the attorney could be necessary if a defect is later discovered.

Question 16

Purpose of Title Insurance

Answer 16

Title insurance provides financial protection against losses sustained as the result of a defective title. Title insurance does not offer protection from all defects. Real property can be encumbered thereby restricting the use of property for both the current and future owners. These prior encumbrances are listed as exceptions to the title policy and restrict the current owner’s use.
Basic title policy coverage protects owners against issues that may arise with clear title to the property, incorrect signatures on documents, forgery, fraud, restrictive covenants, encumbrances, or judgments.

Question 17

Lender’s Title Insurance Policy

Answer 17

Mortgage lenders will insist that a borrower obtain mortgagee (lender’s) title insurance policy before making a loan. This policy protects the lender by paying the unpaid balance of the loan if the borrower should lost title to the property as the result of a title defect.
If the loan is sold to another lender, the mortgage policy is transferable to the new lender.

Question 18

Owner’s Title Insurance Policy

Answer 18

The property owner may also wish to obtain protection and may do so by purchasing a mortgagor’s (owner’s) title insurance policy. The mortgagor’s title insurance policy is not transferable; each new owner who wishes to be insured must obtain a new policy. The policy is in effect, however, for as long as the original purchaser of the policy owns the property, even if it is for the rest of the policyholder’s life.
It should be noted that the amount of the insurance does not change over time. Therefore, should the value of the property increase, the amount of insurance remains the same. An owner could buy a new, updated policy to increase the amount of the coverage if desired.
Florida law does not require a mortgagor (borrower) to obtain life insurance.

Question 19

Curing Defects in Title

Answer 19

A property with a defective title is said to have a cloud on title. It could potentially be sold in the market, but any purchaser of such property might be unwilling to pay a fair market price to obtain it. In order to make a property merchantable, title defects must be eliminated. Curing is the elimination or resolution of the problem that caused the defect.

Question 20

There are essentially three ways in which a defect can be cured:

Answer 20

• Quitclaim deed
• Suit to quiet title
• The marketable record title to real property act (MARTA)

Question 21

Quitclaim Deed

Answer 21

may be used to cure a defect in title by having the party who has a potential claim or interest in the property relinquish the claim by voluntarily executing a quitclaim deed. This is the quickest and least expensive alternative, and is preferred if the party can be located and is willing to release any interest he or she may have.

Question 22

Suit to Quiet Title

Answer 22

may be filed in court with all potential claimants required to appear in court and assert their claim. The court renders a decision and resolves any dispute, thus curing the defect.

Question 23

Marketable Record Title to Real Property Act (MARTA)

Answer 23

the purpose is to eliminate claims-in-antiquity, which are old, unresolved claims that are most likely not supported due to the passage of time.

Title searches need to go back only 30 years to establish a root title in Florida. Any claim outstanding that has not been exercised within that time period is eliminated as a matter of law.

Exceptions to MARTA exist if implied interests by occupancy or use are known, or if evidence of an interest in property is recorded in documents at the root of title or later.

Question 24

Alienation of Title

Answer 24

transferring or conveying ownership from one party to another. Alienation may be voluntary or involuntary.

Question 25

Transfer by Voluntary Alienation

Answer 25

Deed
Will
The willful disposition or gift of real property is called a devise and the recipient of the real property is referred to as the devisee. The disposition or gift of personal property is called a bequest and the recipient of the personal property is referred to as the beneficiary.

Question 26

Deed

Answer 26

is the document that is used to transfer title from one party to another when real property is sold or conveyed by gift. Deeds are the most common document used to transfer title.

Question 27

Will

Answer 27

is a document that provides for the transfer of title upon the death of an individual (decedent) who died testate (left a will). The decedent is referred to as a testator (if a male) or a testatrix (if female).

Question 28

Transfer by Involuntary Alienation

Answer 28

1. Descent and Distribution
2. Escheat
3. Eminent Domain
4. Adverse Possession

Question 29

Descent and Distribution

Answer 29

is a statutory system created by law. This system provides for the transfer of title to legal descendants (heirs) upon the death of an individual who died intestate (without a will). Probate law establishes the order in which such assets must be allocated and provides for the distribution of property to those entitled to receive them. This is a form of involuntary alienation because the state, not the decedent, determines the disposition of property.

Question 30

Escheat

Answer 30

is the reversion of property to the state if someone dies intestate and has no known heirs.

Question 31

Eminent Domain

Answer 31

is the government’s right to take property, through a process called condemnation, for public benefit.

Question 32

Adverse Possession

Answer 32

a legal principle under which an owner may lose title to another person who has take control of the property. The person who claims ownership must enter into open, adverse, hostile, and exclusive possession of the property for a period of seven continuous years. Possession must be hostile to the true owner and must be under a claim of ownership, even if the claim is imperfect. The possessor must pay all real estate taxes for all years of possession and meet other requirements of Florida statutes. If the true owner slept on his rights and failed to eject the trespasser, title may be lost to the hostile claimant.

Question 33

Parties to the Deed

Answer 33

Transferring or conveying ownership from one party to another, called alienation of title, is most often accomplished by executing a document called a deed.

The parties to the deed are the grantor, the party who voluntarily conveys the ownership, and the grantee, the party who voluntarily receives the ownership.

Question 34

Requirements for a valid deed include

Answer 34

• The deed must be in writing.
• The parties (grantor and grantee) must be named.
• The grantor must have the legal capacity to grant ownership (be of legal age and have the legal right).
• Consideration must be described. The sales price is not required, and rarely is ever included. “Ten dollars and other good and valuable consideration” is the consideration description most often used in a deed.
• A granting clause or words of conveyance must be included.
• A habendum clause must define the quality of the ownership interest (rights) being conveyed.
• A legal description of the property must be provided.
• The deed must be signed by the grantor and witnessed by two persons. The grantee is not required to sign the deed.
• The deed is voluntarily delivered and accepted. Title does not transfer until the deed is voluntarily delivered to, and voluntarily accepted by, the grantee.
Deeds do not have to be acknowledged (notarized) or recorded in order to be valid. However, no document may be recorded unless it is acknowledged. A notary public is an officer of the state and therefore, may acknowledge the document.

Question 35

Clauses in Deeds

Answer 35

1. Premises
2. Habendum Clause
3. Reddendum Clause

Question 36

Premises (Granting) Clause

Answer 36

is the only legally necessary clause required in a deed. This clause names the parties, contains words of conveyance, states a consideration, includes the date of transfer, and provides the legal description of the property being conveyed.

Question 37

Habendum Clause

Answer 37

which is also called the to-have-and-to-hold clause, specifies the legal rights being conveyed. The portion of the bundle of legal rights being conveyed is described in this clause, such as “fee simple forever” or “in a life estate.”

Question 38

Reddendum Clause

Answer 38

is used to reserve a right in the title, not the land, such as a remainder estate.

Question 39

Warrants or Covenants in Deeds

Answer 39

These are clauses in deeds that contain promises (warranties or guarantees) made by the grantor to the grantee; however, if the grantor is insolvent, he or she may be unable or unwilling to fulfill the promises made. The presence or absence of warranties does not affect the conveyance of ownership.

Question 40

Warrant of Seisin

Answer 40

is essentially a claim of ownership by the grantor. It assures the grantee that the grantor owns and has the legal right to convey the property.

Question 41

Warrant (or Covenant) Against Encumbrances

Answer 41

assures the grantee that there are no encumbrances against the property other than those disclosed in the deed. The grantor would remain responsible for liens or claims not specified in the deed.

Question 42

Warrant of Quiet Enjoyment

Answer 42

is a promise by the grantor that assures the grantee that he or she will not suffer hostile claims against the ownership of the property.

Question 43

Covenant of Warranty Forever

Answer 43

is an assurance by the grantor that the grantee will enjoy possession and uninterrupted use of the property.

Question 44

Warrant of Further Assurance

Answer 44

is a promise by the grantor to take whatever action is necessary to project and defend the title now and in the future.

Question 45

General Warranty Deed

Answer 45

A general warranty deed, includes all the above clauses. They will be implied if not expressed in the general warranty deed.

Question 46

Types of Deeds

Answer 46

The differences among the various types of deeds are only in the promises that the grantor is willing to make to the grantee. Most deeds contain covenants or warranties, which are promises the grantor makes to the grantee. The difference in the type and number of warrants a deed contains is what differentiates one deed from another. All deeds convey title equally well, but offer different levels of protection to the grantee based on warrants included.

1. Quitclaim Deed
2. Bargain and Sale Deed
3. Special Warranty Deed
4. General Warranty Deed (Warranty Deed)

Question 47

Quitclaim deed

Answer 47

contains no warrants of any kind and therefore provides the least amount of protection to the grantee compared to other types of deeds. With a quitclaim deed, the grantor states that any interest they may have in the property is relinquished to the grantee. The grantor does not promise to have any rights in the property, but rather, any rights he or she may have are being conveyed. Although there is no prohibition against it, quitclaim deeds are rarely used in day-to-day sales and transfers of ownership. Quitclaim deeds are most frequently used to cure defects in title. This type of deed is also frequently used in divorce actions when one spouse quitclaims his or her interest to the other spouse. They may also be used to remove easements.

Question 48

Bargain and Sale Deed

Answer 48

the grantor grants, bargains, and sells the property to the grantee. However, the grantor makes no promise to defend the title if problems should later arise. This type of deed contains only one warrant, a warrant of seisin. This warrant is an assurance to the grantee that the grantor owns and has the legal right to convey the property.

Question 49

Special Warranty Deed

Answer 49

is a type of bargain and sale deed. With a special warranty deed, the grantor grants, bargains and sells the property, but offers protection to the grantee only for claims made by the grantor, the grantor’s assignee, or others who represent them.

Question 50

General Warranty Deed

Answer 50

or simply warranty deed, is also a type of bargain and sale deed. The grantor grants, bargains, and sells the property to the grantee. The grantor promises to defend the title against any and all claims. The general warranty deed is the most common type of deed, and provides the best protection to the grantee of any deed. It includes all of the warrants. If a real estate sales contract does not specify the type of deed to be given, a general warranty deed must be used.

Question 51

Special Purpose Deeds

Answer 51

There are special circumstances where a grantor either cannot, or will not, sign a deed. In those situations, other special purpose deeds must be used, and a grantor must be assigned by the court to act on behalf of the party holding title.

1. Guardian’s Deed
2. Committee’s Deed
3. Personal Representative’s Deed
4. Master Deed
5. Unit Deed
6. Certificate of Title
7. Tax Deed

Question 52

Guardian’s Deed

Answer 52

is used to convey the property of a minor. A minor can never act as a grantor since the law does not view a minor as having the capacity to contract. The guardian is the grantor who acts on behalf of the minor. A minor, on the other hand, may always be a grantee and acquire ownership by any form of deed or conveyance.

Question 53

Committee’s Deed

Answer 53

is used to convey the property of a mentally incompetent person.

Question 54

Personal Representative’s Deed

Answer 54

is used to convey the property of an individual who died intestate.

Question 55

Master Deed

Answer 55

is the instrument used by a developer to convey land to a condominium association in anticipation of development of the project. Once recorded, the condominium association owns the entire property, and individual units within the project may be sold according to the declaration and plat filed by the developer.

Question 56

Unit Deed

Answer 56

is a form of general warranty deed used to convey ownership of individual condominium units from the association to the public.

Question 57

Certificate of Title

Answer 57

is used to show ownership in the event of a foreclosure.

Question 58

Tax Deed

Answer 58

is used to grant ownership to a government body when the property owner did not pay the property taxes. A tax deed gives the government the authority to sell the property to collect the delinquent taxes and transfer the property to the purchaser in a tax deed sale.

Question 59

Government Limitations on Property Ownership

Answer 59

The rights of citizens are not unlimited. The government is said to have sovereign powers, which allows the government to limit or control the actions of citizens when necessary to protect the health, safety, and welfare of the public.

Question 60

Police Power

Answer 60

allows the government to restrict the use of land to protect the health, safety and welfare of the citizens. Zoning, for example, is an exercise of police power that is designed to prevent an undesirable use from infringing on and negatively affecting adjoining property. Building codes and health codes are other examples.

Question 61

Eminent Domain

Answer 61

allows local, state, or federal government, railroads, public utilities, and public housing authorities to obtain ownership to private property. This is called taking. The taking must be only for a public use, such as to build highways, schools, railroads, or public projects. The owner must be paid a just compensation for the property. If a unit of government requires land for expansion of public services, the property owner will be contacted and offered a price for the property required. The owner may negotiate with the condemning authority and may even reach an acceptable price. If so a contract is completed, the property is sold, and the transaction is finalized. If the parties cannot reach agreement through negotiation, the condemning authority will implement a legal proceeding in court to exercise its right to acquire the property. This action to enforce the sale is called a condemnation proceeding. Both parties will typically have the property appraised, and a decision made as to the value is determined in court, usually with a trial by jury. There is no cost to the property owner when taking the issue to court; the condemning authority must pay for appraisal fees, attorney fees, and court costs.

Question 62

Taxation

Answer 62

is the power that allows the government to levy taxes on private property. If an owner does not pay the property taxes when they are due, the unpaid tax lien may be foreclosed in court, thereby forcing the property to be sold. The government receives payment from proceeds of the sale.

Question 63

Escheat

Answer 63

allows the state to acquire ownership of property when an owner dies intestate (without a will) and no lawful heirs can be located.

Question 64

Private Limitations on Property Ownership

Answer 64

Private limitations are restrictions placed by an owner that affect the use of the property by subsequent owners. These may include easements, leases, party wall agreements (where two or more owners share a common wall), or covenants between owners that extend to future owners.

Question 65

Encroachment

Answer 65

An encroachment is an unauthorized physical intrusion onto property owned by another such as a fence built over the property line. Legal action in court can be brought to have an encroachment removed. The existence of an encroachment can only be determined by a current, up-to-date survey.

Question 66

License to Use

Answer 66

A license is not an interest in the land. It is temporary, revocable right to use another’s property. Examples of licenses include the right to use someone’s swimming pool or hunt on another person’s land.

Question 67

Deed Restrictions

Answer 67

One of the most common forms of private limitation is deed restrictions. Deed restrictions are most often placed against several properties at the same time by a developer or builder. They may limit virtually anything that is not contrary to law, such as height, color, architectural style, fencing, and even landscaping. The developer, usually, but not necessarily, records these restrictions in the public records. Deed restrictions are often called restrictive covenants. Since these restrictions are private limitations on use, enforcement against violators is up to the affected owners. A suit would have to be brought in a civil court action to bring violators into compliance.

Question 68

Easements

Answer 68

An easement is a limited right given to the easement holder to use a portion of another party’s property for a specific purpose. Easements are encumbrances that affect both a property owner’s rights of use and potentially the value of the property. An easement is a legal interest in real property that is created by contract, deed, or operation of law.

Question 69

Easement Appurtenant

Answer 69

involves two or more parcels of property and runs with the land, which means the right attaches to the land, not to a person or other entity, and is binding on all present and future owners.

Question 70

Easement by Necessity

Answer 70

an example of an easement appurtenant. When a landowner subdivides his or her property in such a manner as to create a landlocked parcel, the law assumes the purchaser of such land has a right of access. If the deed that creates the landlocked parcel does not specify an easement for access to and from the parcel, the purchaser can sue in court and the court will impose the easement. The easement by necessity creates two separate estates. The party who created the landlocked parcel must give up the right of access, while the purchaser of the landlocked parcel gains a right over the party who created it. The party who gives up the right is called the servient estate; the party who gains a right is called the dominant estate.

Question 71

Easement in Gross

Answer 71

involves rights of access by one party onto a parcel of real estate owned by another party. The most common easement in gross is a utility easement. An easement in gross does not run with the land as the utility company may choose to give up the right or sell it to another entity such as a cable television provider. The utility company may decide to transfer the right back to the property owner by quitclaim deed if the access is no longer value.

Question 72

Easement by Prescription

Answer 72

is created in Florida by 20 years or more of continuous and uninterrupted use of a portion of another person’s property. A pathway across private property to a beach or similar uninterrupted use for the statutory period of 20 years or more creates this type of easement. Once established and confirmed by a court, this becomes a public right of access. In some states, the statutory period is different from Florida.

Question 73

Leases

Answer 73

A lease creates a legal interest in real property, but the lease does not convey ownership. A lease can be either oral or written.

The property owner is the lessor, who grants the right of occupancy and use; the tenant is the lessee, who receives the right to use the property.

Lease agreements are terminated by one or more of the following: destruction of the property, lien foreclosure, condemnation through eminent domain proceedings, expiration of the lease term, bankruptcy of the tenant, agreement of the parties, or by breach of the lease provisions.

Question 74

A valid lease agreement must be entered into by legally competent parties and contain the following:

Answer 74

• The names and signatures of the lessor and lessee
• Consideration (money or something of value given by the lessee to the lessor)
• Term of the tenancy
• Legal description of the property
The Statute of Frauds requires that a lease for a period of more than one year be in writing and signed in order to be enforceable in court. It must be witnessed by two persons and conform to the same requirements as a valid deed.

Question 75

Model Lease Forms- Periods of One Year or Less

Answer 75

Real estate licensees can fill in the blanks on model residential lease forms approved by the Florida Supreme Court covering periods of one year or less.

Question 76

No Modifications or Attachments Allowed

Answer 76

Licensees are not allowed to modify the form in any way or to interpret the language in response to a question. No attachments or addenda may be added. If the form requires changes or interpretation, the advice and assistance of an attorney must be obtained.

Question 77

Sale Subject to Lease

Answer 77

A property owner may sell a leased property “subject to the lease.”

However, with this condition of sale, the buyer must honor the rights of the tenant under the original lease.

Question 78

Types of Leases

Answer 78

1. Gross Lease
2. Ground Lease
3. Net Lease
4. Percentage Lease
5. Lease-Option
6. Sale-Leaseback
7. Sale-Contractback

Question 79

Gross Lease

Answer 79

is defined as, “a lease in which the tenant agrees to pay a fixed rental amount, and the landlord pays all expenses related to the property such as real estate taxes, insurance, and maintenance costs.” A residential lease is usually a gross lease.

Question 80

Ground Lease

Answer 80

is typically a commercial, long-term lease in which the tenant is permitted to develop the property (often undeveloped) during the lease period. All expenses if the property, such as taxes, maintenance, insurance, and financing coasts, are the obligation of the tenant. At the end of the lease, the land and all structures and improvements revert to the property owner. This type of lease is an alternative to the sale and purchase of the property. Without a long-term lease (i.e. 50-99 years), the tenant would otherwise be unwilling to build costly improvements if the benefits of the improvements could only be realized for a small number of years.

Question 81

Net Lease

Answer 81

“a lease in which the tenant pays a fixed rent plus all or a portion of the operating costs such as real estate taxes, insurance, and maintenance.” A commercial and industrial lease are commonly net leases. The net rent is paid to the landlord after the tenant has paid the expenses they have agreed to pay.

Question 82

Percentage Lease

Answer 82

“a lease in which the tenant pays a monthly base rent plus a percentage of the annual or monthly gross sales of goods sold on the premises.” A percentage lease is common in retail centers and malls.

Question 83

Lease-Option

Answer 83

“a lease that contains an option to purchase the property within a certain period of time and under specified conditions.” Typically, a portion of the rent may be applied to the purchase price if the tenant wishes to exercise the option. The lease and the option may be one document or two different documents that are executed simultaneously. Lenders may limit the amount of rent that may be applied toward the purchase price.

Question 84

Sale-Leaseback

Answer 84

occurs when a property owner sells the property to an investor who immediately leases the property back to the original property owner, who then becomes the tenant. A sale-leaseback frees the equity the seller had in the property, in effect providing 100% financing. This arrangement appeals to many retailers and financial institutions that can use the money that was formerly tied up in the property to conduct business. The investor gains a quality tenant under a long-term lease, often 20 to 30 years, as well as tax benefits and potential appreciation in value.

Question 85

Sale-Contractback

Answer 85

is a similar agreement to a sale-leaseback in that it involves the sale of a property with a provision for it to be repurchased at a future date for a specified price. With a sale-contractback, the former owner/seller makes mortgage payments to the purchaser rather than lease payments.

Question 86

Leases with Changing Payment Rates (i.e. Graduated Payment or Step-Up Lease)

Answer 86

There are several different types of variable leases in which rent payments are periodically adjusted, usually upward. The rate adjustments can be specified as pre-determined increments (Graduated Payments) or can be based on other factors such as market value (Step-Up Lease) or measures such as the Consumer Price Index (CPI).

This type of lease is not generally required in a short-term residential lease, since the lessor can usually increase the rent as needed whenever the contract is renewed. However, in a long-term residential or commercial lease, the ability to adjust the rent payments mitigates the risk of variable costs and inflation rates to the owner/lessor by not locking in a fixed rental rate. This type of lease is attractive to new business tenants or renters whose income may increase over time.

Question 87

Two basic components of a lease

Answer 87

a period-of-time and a unit of space, which is key to understanding the difference between assignment and sublease.

A lease that prohibits an assignment does not prohibit a sublease, and prohibition of a sublease does not prohibit an assignment.

Question 88

Assignment

Answer 88

all space for remainder of lease period. Occurs when a lessee transfers all of the leased space for all of the remaining time remaining in the lease period. The lessee is the assignor; the person receiving the rights is the assignee. The assignor assigns leasehold rights to the assignee. The assignee becomes the lessee and pays rent directly to the landlord.

Question 89

Sublease

Answer 89

less space or less time. Occurs if a lessee transfers less than 100% of the space that has been leased, or makes a transfer for a shorter period-of-time than the entire remaining lease period and becomes the sublessor or the second landlord. The original lessee remains responsible for making rent payments to the landlord and is the conduit for making payments from the sublessee to the landlord. The sublessor subleases the property to the sublessee. This is referred to as a sandwich lease as the original tenant is “sandwiched” between the landlord and the sublessee.

Question 90

Nonresidential Leases

Answer 90

Defined as:
• “any property having more than four residential units,
• vacant land zoned for more than four residential units, or
• agricultural property containing more than ten acres.”

Question 91

Lien as Enforcement to Collect Broker’s Fee

Answer 91

Part IV of F.S. 475, the Commercial Real Estate Leasing Commission Lien Act, presumes a broker to have a lien on the property interest owned by the party that employs a broker under a nonresidential lease agreement. The broker is required to advise the employer either in the employment agreement or by a separate document that, upon performance by the broker, a lien may be filed in the public records to enforce collection of the stipulated commission or fee. No later than 90 days after the tenant takes possession of the leased premises, the broker must record a lien notice in the county or counties where the property is located. The lien is unenforceable if the broker fails to record the lien notice within this time period.

Question 92

Lien

Answer 92

A lien is a financial claim against property by a creditor or unit of government that is used to secure the payment of a debt or other obligation owed by the property owner. Either the property owner must pay the lien holder or the lien holder is entitled to sue in court to have the property sold so payment may be made from the proceeds of the sale. A lien is an encumbrance on the title to property, but is not a transfer of title.
A lien may be placed against property voluntarily by the owner or involuntarily by a creditor. A mortgage, which is given voluntarily by a property owner, creates a lien, while an unpaid tax certificate is placed against the property involuntarily.

Question 93

Foreclosure

Answer 93

Foreclosure is the enforcement of a lien. Foreclosure is accomplished by legal proceedings in court instituted by the lien holder as the result of nonpayment of a debt. Foreclosure terminates the rights of the owner and results in the public sale of the property, whereby the proceeds are used to satisfy the debt.

Question 94

Summary of Liens

Answer 94

A lien may be specific to one property, or be general in nature and apply to any property the person may own. A lien may be classified as either superior or junior.

Question 95

Superior Liens

Answer 95

Takes precedence over all other types of liens. If a foreclosure sale occurs, a superior lien is paid from the proceeds of the sale before any junior lien.

A superior lien is involuntary and is imposed by law without the owner’s consent. There are three types of superior liens.

1. Real estate property taxes (specific lien)
2. Special assessment lien (specific lien)
3. Federal estate tax lien (General lien)

Question 96

Real Estate Property Taxes (Specific Lien)

Answer 96

also known as property taxes, are assessed and become a lien on January 1st of each year, even though the owner does not know the amount until the tax bill is received after November 1st of the same year. Since the assessment is from January, but not known or payable until November, taxes are paid in arrears (payment made after the charges are incurred).

Question 97

Special Assessment Lien (Specific Lien)

Answer 97

for improvements, such as road paving, sidewalks, and sewers attach to a property until the full amount of the lien has been paid.

Question 98

Federal Estate Tax Lien (General Lien)

Answer 98

becomes a lien at the time of death. Some states, but not Florida, also impose a state inheritance tax.

Question 99

Junior Liens

Answer 99

Junior liens are lower in priority than superior liens. The priority of a junior lie with respect to other junior liens is based on the date of recording in the public records, not the amount of the lien. If there is more than one junior lien, the junior liens will be paid based on whichever lien was recorded first.

A construction lien dates back in priority to the date on which the first materials were delivered or labor was first performed on the property.

Question 100

Types of Junior Liens

Answer 100

1. Mortgage lien (specific lien)
2. Vendor’s lien (specific lien)
3. Judgment lien (general lien)
4. Construction (mechanic’s or materialman’s) lien (specific lien)
5. Federal income tax lien (general lien)
6. State corporate incomee tax lien (general lien)

Question 101

Mortgage Lien (Specific Lien)

Answer 101

is a voluntary pledge of property as security for repayment of a loan.

Question 102

Vendor’s Lien (Specific Lien)

Answer 102

an owner who sells a property is entitled to a lien against the property which is being sold to secure any unpaid balance of the purchase price. A court will impose a vendor’s lien only if no other form of security has been received. If a mortgage is given to the vendor/ seller, or if other real or personal property is used to secure the full purchase price of the property, the vendor’s lien is not available.

Question 103

Judgment Lien (General Lien)

Answer 103

is imposed when a party is entitled to collect damages awarded by a court as the result of a lawsuit. A judgment lien is filed in the public records against property owned by the debtor to enforce payment of the court award. The lawsuit from which the court award was generated may have had nothing to do with the property.

Question 104

Construction (Mechanic’s or Materialman’s) Lien (Specific Lien)

Answer 104

a contractor or builder who has not been paid money that is due to them is entitled to a lien against property for materials or labor used to build or improve the property. The construction lien dates back in priority to the date on which the first materials were delivered or labor was first performed on the property. The contract (mechanic or builder) has 90 days from the date of completion of the work to file the lien in the public records if the property owner has not paid the amount owed. Since this lien dates back to when the work was first performed or when the first materials were delivered, the lien will take priority over other junior liens filed between that date and the date the lien is filed in the public records. The construction lien is void if foreclosure action is not instituted within one year from the date of the recording.

Question 105

Federal Income Tax Lien (General Lien)

Answer 105

can be placed against the property of an individual for nonpayment of federal income taxes.

Question 106

State Corporate Income Tax Lien (General Lien)

Answer 106

corporations in Florida are subject to a state income tax. Nonpayment can result in a state corporate income tax lien filed against corporately owned property.

Question 107

Lis Pendens

Answer 107

A lis pendens is notice of a pending lawsuit against a property owner. Technically, a lis pendens is not a lien. If the lawsuit is successful, the lis pendens becomes a lien, but if the suit is unsuccessful, it has no effect on the title.

Question 108

Notice to Potential Purchaser

Answer 108

A lis pendedn gives notice to a potential purchaser of the pending lawsuit that might later affect the title to the property. A title search prior to closing of a sale always checks the lis pendens notices to be sure that none is outstanding against the property. Otherwise, if the lawsuit were successful, the purchaser may have a lien against the property for a debt they had no part in creating.

Question 109

Broker’s Right to File a Lien- Residential Property

Answer 109

A broker cannot attempt to collect an unpaid commission by filing a lien on any property defined as residential property that has been the subject of his or her employment, with two exceptions:
• A property owner may approve the filing by granting authority in a listing or sales contract, or
• A broker may record a judgment rendered by a Florida court in the amount claimed.

Question 110

Lien in Nonresidential Sales

Answer 110

Part III of F.S. 475, the Commercial Real Estate Sales Commission Lien Act, presumes that a broker has a lien for collection and payment of commissions due in a nonresidential sales transaction. The broker is required to give written notice to the property owner in the listing agreement or in a separate document stating that, upon execution of the listing, the broker has a lien against the owner’s interest in the property. The lien is personal property, and only attaches to the net proceeds, not to the real property. Within 30 days after a commission has been earned (but not later than one day prior to closing), the broker may record a lien notice in the county or counties where the property is located.
A copy of the lien notice must be delivered to both the owner and closing agent. The closing agent is authorized to withhold the amount due to the broker from the seller’s net proceeds.