10.04.08
Title Company Sued for Unrecorded Lien by City
A recent case out of the U.S. Court of Appeals 11th Circuit (on appeal from the United States District Court for the Southern District of Florida; D. C. Docket No. 07-20494-CV-KMM) is of particular interest to the title insurance industry, abstractors and title searchers. Hon Realty, a Florida Corp., claimed First American Title Insurance Co was responsible, under terms of its title policy, for a money lien by the city. The Lien was not recorded with the respective county.
First American Title searched title, prepared a title commitment, closed the loan, and issued a title policy on the date of closing. An enforcement order regarding a lien for the violated ordinance had been issued prior to closing, but had not been recorded with the Miami-Dade County Clerk of Court until two weeks after closing. The question is whether the term “public records” (as used in the contractual language in the title policy) included information available at the city, but not yet recorded with the county.
First American argued, according to statute, that there a is no constructive notice until a lien is filed with the Clerk of Court. Hon Realty argued that because the enforcement order for the Lien was available at this city it should be construed as public record. The Court of Appeals disagreed, citing Florida statute 695.11, the states recording statute for liens filed against real estate. which says the Lien is not constructive notice until made part of the Official Record.
We believe the circuit court judges made a good decision. By reading the statute exactly as it was written, it is clear what the abstractor and title company are responsible for. The title insurance industry, abstractors and searchers are already burdened with a significant search process, made more complex by the variety of liens and places to search, which vary by state, county, township, and city. Had the city correctly followed the statute and promptly recorded the lien, there would have been no issue and First American would easily have located and paid the lien. Kudos to the 11th circuit