Removing Standard Title Exceptions

Most title commitments will contain standard title exceptions that safeguard against the potential for the discovery of unrecorded documents and other issues related to the rights and status of the owner of the property. There exist, in total, five such exceptions: gap, tax, construction lien, survey and parties in possession. Due to the fact that many insured parties find these exceptions to be less useful and more of an irritant, in many states the underwriter is charged with the task of removing these standard exceptions by means of an Owner’s Affidavit and Survey. Below you will find descriptions of these five title exceptions as well as how they might be removed from your title.

Gap Title Exceptions

This exception pertains to matters recorded after the recording of the insured instruments but before the effective date of the commitment. By way of example, if a post-closing update discovers, subsequently to the date of closing, a claim of lien was placed against the borrower, and this document was recorded prior to the insurance of the mortgage, the lien would take priority over the mortgage. This would greatly encumber the process for all parties, including the insured lender.

The preceding example assumes that this exception was not removed. The State of Florida, however, requires that the gap exception be removed at the time of closing. This responsibility falls upon the title agent, who will perform this function upon the receipt of monies and when prepared to close. Because underwriters are aware of the risks of the gap, in an effort to close this gap as much as possible, they will usually require a pre-closing update be conducted within three days or fewer of the finalization of the process.

Tax

This exception deals with assessments and real estate taxes that may be owed following the issuance of the title insurance policy. A standard title policy can become subject to these encumbrances, which is why all underwriters require the standard tax exception remain included in all policies.

Construction Lien

This exception protects contractors, subcontractors and similar entities who improve upon the property by providing them with lien priority. The State of Florida demands that this exception be removed if no work has been done to improve upon the property within 90 days of closing. This is why many underwriters require, in order to strike this exception, that the Owner’s Affidavit contain language denoting that no work will be performed during that timeframe.

Survey

Property surveys are conducted to ascertain, among other issues, that no easements have been made against the property. If this exception was not removed by the previous owner due to a failure to properly survey the property, the current owner will be forced to deal with any legal matters stemming therefrom. Florida Statute 627.7842(1)(a) requires that “a survey meeting the minimum technical standards… [be] completed on the property within 90 days before the date of closing.” These “minimum technical standards” can be found under Chapter 61G17-6.003 of the Florida Administrative Code.

As long as an adequate survey is provided, the State of Florida demands that the underwriter strike this exception.

Parties in Possession

An unrecorded agreement, such as a lease, can complicate the closing process by, for example, having the rights of tenants enter into the equation. To remove this exception, the State of Florida requires an Owner’s Affidavit which states that there are no parties in possession of the property and/or provides a clear identification of the rights of particular parties involved.

The professionals at Marina Title offer their expertise and knowledge in answering any questions concerning title insurance, exceptions and many other matters pertaining to Florida real estate. Contact us by email at [email protected], or by phone at (305) 901-5628.