By Aaron M. Davis, President of Hillsborough Title

It’s June of 2013, and I get the call. It’s that number you haven’t seen call your cellphone in a while, and something in your gut says, “This isn’t going to be good.” An agent who does business with us, let’s call her “Sally” for our purpose here, was handling the seller side of a transaction in which the buyer selected title. The buyer was an institutional investor who had a relationship with a national title provider. In June of 2013, it was NOT the norm for the title agency to order any type of municipal lien search or permit search. At this time, it was not required as part of the FAR/BAR contract. In fact, the contract only contained the Miami-Dade provision as to municipal lien searches at that time. However, since the buyer was an institutional investor, they were well aware of the risk that resided in Florida pertaining to permits.

Sally begins the conversation something like this, “Hi Aaron, I have a seller of a property who is ready to sue me, my broker, the previous seller, and the law firm who handled the transaction.”

I respond, “Well, good morning to you Sally!”

Sally went on, filling me in on the details.

The current Title Company performed a Municipal Lien Search with Permit Search as part of the buyer’s requirements and due diligence. The permit search pulled up an open permit on the pool. The house was built in 1998 and Buyer 1 bought direct from the builder/developer. The pool was added to the property in 1999 by buyer 1, and in 2004, Buyer 1 sold to Buyer 2, then Buyer 2 selling to the current buyer, Buyer 3 in 2007.

However, nowhere along the chain of the transaction was any permit search performed. The contracts didn’t call for it, and the title provider never searched, as it wasn’t customary or required. Back then, the title commitments and policies contained an EXCEPTION for what is now called the Section 159 Statute, which is related to items of “unrecorded nature” (i.e. unrecorded code enforcement, utility bills and permits).

So in 2013, the first permit search was completed only to find the open permit on the pool. It was a cash offer and the seller was free and clear; no liens, judgments, and the seller already vacated the property and was leaving the state. I make some calls, get it resolved and close the deal! Easy peasy, lemon squeezy.

WRONG!

So here it begins: The buyer won’t buy the home until the permit is closed. So, my first call to action- call the pool contractor – from 20 years ago – who is no longer in business. Second call, let’s contact another pool contractor to see if they can inspect and sign off on another contractor’s work. WRONG, no can do. Their liability insurance won’t allow that.

Next, let’s call an engineer! An engineer went to school for this sort of thing, and he can sign off! So we have the owner call the engineer to see how he can assist. The engineer says, “Sure, no problem, let me call the county to see the issue with the permit.” As it turns out, it was the final PLUMBING inspection for the pool. Engineer laughs and says, “Well, it’s 20 years old and it’s not leaking, I’ll sign off on it.” (Crowd erupts with applause. Problem solved, right?)

As my friend Lee Corso says, “NOT SO FAST MY FRIEND!!!”

Per the county, in order to close a permit of this nature, the pool has to be brought into current compliance with Child and Elderly Safety. So, guess what the pool that was built in 1999 DIDN’T have? You guessed it, child safety gates!

Let’s do the math:

• $250.00 to the County to reopen the permit
• $400.00 to the engineer
• $2000.00 for the child safety gate
• $50.00 County re-inspection fee

Now, let’s add up the losses:

• $1,000.00 is expenses to the seller for added utility, storage, expenses
• Future referrals to the agent from a seller who thinks perhaps it’s the agent’s fault
• Future referrals to the prior title company, who did the closing in 2007, that the agent now may think is THEIR fault

The losses can go on and on.

In September of 2013, the FAR/BAR contract was then amended to include the requirements for permit searches. After the fact, we now see the slew of issues that are caught due of performing the search. (Roofs are a very common issue.)

Now here is the scary part – even though it’s is a part of the FAR/BAR contract, there are still title agencies and law firms that STILL DO NOT PERFORM THE REQUIRED SEARCH!

With that being said, agents, I highly suggest that you ask for THREE things from your title provider when closing:

1. Get a copy of the preliminary settlement statement (to have your client’s fees)
2. Ask for a copy of the title commitment (to see if there are any items outside of the norm, odd exceptions, etc)
3. A copy of the results from the lien search, showing there are no outstanding issues that will turn up in the standard title search