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Florida Residential Real Estate Law
Residential Real Estate Law
Real estate law involves a person's rights relating to the ownership and
possession of land, buildings or structures on land (including those materials
beneath the land's surface, such as minerals and oil, and the area above the
land's surface). Real estate is sometimes referred to as real property in order
to distinguish it from personal property, which is moveable property. A common
stumbling block for many consumers entering the real estate market is the number
of unfamiliar terms used to describe the various possessory and ownership
interests a person can have in a piece of real estate. This chapter discusses
some of the basic concepts in real estate ownership, including buying a home or
condominium and landlord/tenant relations.
Real Estate Ownership
There are a variety of ways in which a person can own real estate. The most
common form of ownership is fee simple absolute. Fee simple absolute means the
owner has the right to sell the property, use the property as security for loans
(i.e., encumber the property), improve the land or buildings, possess the
property and pass the property on to his or her beneficiaries as part of the
estate. A fee simple absolute is the most complete form of ownership.
Property can also be owned jointly by two or more persons. A tenancy in
common, for example, is a form of joint ownership whereby all of the owners have
a distinct and undivided interest in the property. Each owner is free to
possess, sell or encumber the property. Should one of the owners die, his or her
interest will be transferred according to his or her will or according to the
state's intestacy laws if there is no will. A joint tenancy is also a form of
joint ownership. However, when a joint tenant dies, his or her interest in the
property is transferred to the remaining joint tenants, not to his or her
beneficiaries. This transfer of ownership to the remaining owners is known as a
right of survivorship.
Additionally, property can be owned by a husband and wife as an estate by the
entireties which is similar to a joint tenancy. However, if the marriage is
dissolved, the former husband and wife become tenants in common.
Encumbrances
An encumbrance is an obligation that attaches to a piece of real property
and is held by a party who is not the owner of the property. An encumbrance is
not an ownership interest in real property, and the property may be bought and
sold even though there are encumbrances attached to the property. Encumbrances
attach to property, not property owners, so a person who buys property with an
encumbrance is bound by the encumbrance.
One of the more common forms of an encumbrance is an easement. An easement is
the right to use another person's land for a particular purpose. There are many
forms of easements. Public utility companies frequently have utility easements
that permit them to run gas, water or electrical lines through property. The
owner of property on a lake shore might sell to the owner of an adjacent lot
without lake access an easement to cross over to the shore. A person who owns
property that is landlocked may receive an easement from an adjacent landowner
to have access in and out of the property. This is known as a right of way.
Another type of encumbrance is a lien, which is a charge against property
that provides security for a debt or obligation of the property owner. The lien
holder does not own the property. The owner of property may voluntarily agree to
a lien, perhaps by taking out a mortgage. Sometimes mortgages provide the holder
of the mortgage with additional rights if the property is sold or encumbered
further. A lien will be imposed for nonpayment of taxes. Another common lien is
a construction lien. A construction lien may arise when someone furnishes labor
or materials to improve a piece of property and is not paid. By giving proper
written notice and filing and serving a claim of lien with the clerk of the
circuit court within the required time, the construction lienor (the person
holding the lien) may force the sale of the property and payment of the lien. A
property owner must comply with the construction lien law in order to avoid
paying for labor and materials in excess of the amount specified in the contract
with the general contractor.
Deed restrictions, also known as covenants, conditions or restrictions,
encumber an owner's freedom to use the land. They may be imposed on a buyer when
property is sold and are included in the deed to the property. Property
developers seeking to retain a certain community atmosphere often use deed
restrictions. Restrictions may limit the number or types of trees, the color of
a house, the size and shape of a house, and require general upkeep of the
property.
There are other restrictions on the use of property as well, such as zoning
ordinances and building codes.
Buying a Home
Buying a home can be one of the most rewarding experiences a person can have
and one of the most complicated and stressful. Every home purchase involves a
number of potentially complicated legal issues, confusing terminology and a
great deal of paperwork. Retaining a real estate attorney to assist in the
process is often a necessity. Not only can an attorney explain the significance
of various decisions a buyer will have to make, but the attorney can point out
potential problems that a buyer may not otherwise see.
Real Estate Agents
Most people interested in buying a home work with a real estate agent. Real
estate agents help to bring buyers and sellers together, assist in the purchase
process, and typically are paid a commission by the seller based on the purchase
price of the home. In the past, real estate agents represented only the
interests of the seller. Today, however, real estate agents have more
flexibility in terms of whose interests they represent. A real estate agent can
represent a seller, a buyer, serve as a dual agent representing both parties or
as a transaction broker putting the agreement together without representing
either party. Whomever an agent represents, he or she has a duty to disclose
that relationship to the buyer and seller. If a buyer hires an agent, that agent
will often split the commission with the seller's agent.
Inspection
Though a seller and a seller's agent are obligated to make full disclosure
of a house's material defects, it often pays to have a professional evaluate a
home's structural and mechanical condition. A professional may uncover problems
overlooked by an untrained eye: rotting floors, termites, rusty plumbing and
defective electrical systems. A professional may also be able to give a buyer a
more accurate estimate of repair costs.
Buyers may also want a real estate appraiser to research property
appreciation rates, neighborhood population trends, average neighborhood income
and employment base, or find out if there are any plans to build an unwelcome
facility nearby, like a nuclear reactor or garbage dump. The more research a
buyer conducts, the more likely he or she will be satisfied with the purchase.
Purchase Agreement
A purchase agreement is a written document submitted by the buyer to the
seller detailing the buyer's terms for the purchase of real estate. The terms of
the purchase agreement can be enormously complicated and cover a panoply of
issues such as price, down payment (also known as earnest money), mortgage
arrangement, what items will be left with the property, zoning restrictions,
title, deed, taxes, remedies in the event of default, conditional requirements
for purchase and other important details (such as a satisfactory inspection).
The seller may accept the buyer's purchase agreement, reject it or issue a
counter-offer. Usually, a buyer will limit the period of time in which a seller
can accept the purchase agreement. If that period passes without a seller's
acceptance, the buyer is under no obligation to purchase the real estate.
However, if the seller accepts the buyer's purchase agreement within the time
allotted, the buyer is legally committed to buying the real estate under the
terms of the agreement. Therefore, it is extremely important that the buyer
understand the terms of the purchase agreement before signing it and submitting
it to the seller. Any contingencies (e.g., need to obtain financing) should be
provided for in the purchase agreement.
Title and Title Insurance
A title is a right to partial or whole ownership of a piece of real estate.
Typically, a purchase agreement will include a provision conditioning the sale
of the property on the seller providing a marketable title. A marketable title
is a title generally free from encumbrances and title defects that may lead to
litigation. An example of a title defect might be a gap in the history of the
property's ownership. In such a case, after the buyer has purchased the
property, someone could conceivably show up and claim to be the rightful owner.
To protect him- or herself, a buyer should purchase and obtain title
insurance as part of the purchase process. If an unknown title defect does
surface after purchase, the buyer may recover damages under the policy. A title
insurance policy sometimes includes a provision requiring the title insurance
company to defend the title in litigation should anyone challenge the title.
Title insurance can also be purchased by the holder of the property mortgage.
Deed
A deed is a written instrument that transfers title to property from one
person to another. There are a number of different types of deeds. The most
common is the warranty deed which requires the seller to pledge or warrant that
he or she is the legal owner of the property and that there are no outstanding
liens, mortgages, or other encumbrances against it. A warranty deed also
guarantees that the seller may be held liable for damages if the buyer later
discovers the title is defective. A warranty deed is no substitute for title
insurance however. A seller can disappear, move out of the jurisdiction, die or
declare bankruptcy.
Another type of deed is a quitclaim deed. A quitclaim deed relinquishes
whatever interest the seller may have in a piece of property to the buyer. A
quitclaim deed does not give the buyer the same protection as a warranty deed.
If the seller is the sole owner of the property, the quitclaim deed is enough to
transfer title, but there is no warranty the title is valid. Quitclaim deeds are
frequently used during the property settlement phase of a divorce.
It is important for new buyers of property to record their deeds at the
public records office, located in every county courthouse. Recording a deed
gives "notice to the world" that a particular piece of property has
been sold and that subsequent purchasers should be on guard.
Mortgages
Few people have enough money on hand to pay the full purchase price of a
house. Consequently, most real estate is purchased with the aid of a mortgage
loan from a financial institution such as a bank, credit union or mortgage
company. A mortgage is a loan for which the buyer agrees to repay the principal
amount, plus interest, over a period of years. The subject of the mortgagethe
house and propertyis the security for the loan. If the buyer fails to pay the
mortgage, the financial institution has a right to foreclose on the property in
order to satisfy the debt.
There are a variety of different types of mortgages. An FHA mortgage is a
loan from a private lender that is guaranteed by the Federal Housing
Administration. FHA mortgages tend to have lower interest rates, lower down
payments and longer terms over which to make payments (up to 35 years). However,
not every house can be financed with an FHA mortgage, especially older houses
that do not pass the inspection required by the federal government. VA
mortgages, which are available to certain veterans, are loans from private
lenders guaranteed by the federal Veterans Administration. These mortgages
typically offer even lower interest rates than FHA loans and may not even
require a down payment. Conventional mortgages are loans made by private lenders
that are not guaranteed by the government. Thus, they typically have higher
interest rates which tend to vary from lender to lender.
The key to obtaining a favorable mortgage is to shop around for the best
interest rates and terms. Among the terms to keep in mind are:
*Prepayment penalties
*Service charges
*Is the mortgage assumable?
*Maintenance of insurance
*Lender's right to change interest rates during the term of the loan
*What is the maximum repayment term?
*Can more money be borrowed under the same mortgage agreement?
Closing
If the terms of the purchase agreement have been met, inspections concluded,
title questions settled and financing obtained, all of the parties involved in
the sale of the house will meet to sign documents and transfer money. This
meeting is known as the closing. Just before the closing, the buyer and seller
may meet to inspect the property one more time to ensure that the house and
property have not substantially changed since the buyer last saw them.
A basic closing usually includes, among other things, the buyer showing the
lender proof of title insurance and homeowner's insurance. The buyer then signs
the mortgage agreement. The completed mortgage agreement provides cash toward
the amount of the purchase price which is given to the seller. The seller then
signs the deed that transfers ownership of the property over to the buyer. After
any remaining cash adjustments are made, the purchase is concluded and the buyer
should be the new property owner. The buyer should immediately have the deed and
mortgage recorded at the local county records office.
Condominiums
A condominium is a planned development, either residential or business, in
which a person has individual ownership of a unit and joint ownership of the
common elements. The common elements are any portions of the condominium not
included in the units such as sidewalks, hallways, swimming pools and tennis
courts. An owner of a condominium unit owns the area formed by the walls, floors
and ceiling, and everything inside, including appliances, fixtures and cabinets.
The owner pays property taxes based on the value of the unit and a pro rata
portion the common areas.
Condominiums are operated by condominium associations made up of unit owners.
The association is a corporation and can enter into contracts, sue, be sued, and
can make assessments against the units to pay common expenses. Though Florida
law sets certain mandatory provisions regarding condominium ownership, the
condominium association has the authority to impose many of its own operational
rules concerning things such as pets, children, parking, unit maintenance, noise
levels and unit resale or leasing. Therefore, when considering the purchase of a
condominium unit, be particularly aware of all rules, restrictions and
regulations in the condominium documents and those promulgated by the
condominium association.
Landlord/Tenant Relations
When a tenant rents a residential space, the tenant and the landlord become
parties to a contract known as a lease. The lease sets out the essential terms
of the contract such as the involved parties, amount of rent, when rent is to be
paid, duration of lease and who pays for utilities. Leases for more than one
year fall within the Statute of Frauds and must be in writing to be enforceable.
Leases
Leases can be structured in a variety of ways. A lease with a specified
termination date is known as a tenancy for years. Unless the parties agree
otherwise, on the last day of the lease the tenancy is terminated and there is
no advance notice required since the termination date was already specified. A
periodic tenancy continues for a specified period of time, such as year-to-year
or month-to-month, but there is no definite termination date. Unless terminated
according the requirements set by Florida law, a periodic tenancy is
automatically renewed from period to period. A tenancy at sufferance describes
the situation wherein a tenant wrongfully stays beyond the termination of his or
her lease. Landlords wanting to evict a holdover tenant must follow a procedure
set by Florida law. All tenants have the right to sublease their rental
property, provided the lease or other binding restriction does not specifically
prohibit it.
Security Deposits
Landlords commonly require renters to pay a security deposit prior to taking
possession of the premises. The security deposit normally is used to cover the
costs of any damages (beyond ordinary wear and tear) or unpaid rent. Under
Florida law, a landlord must hold the security deposit in either a noninterest
bearing account, an interest-bearing account (with the tenant receiving either 5
percent interest annually or 75 percent of the interest the deposit earns), or
post a surety bond in an amount equal to the security deposit. Within 30 days of
receiving the security deposit, the landlord must notify the tenant of the
manner in which he or she is holding the money. At the end of the lease, the
landlord has 15 days to return the money (with interest, if applicable) or
notify the tenant of a claim against the security deposit for damages. If the
landlord makes a claim, the tenant has 15 days to object. If the tenant does not
object, the landlord may deduct the amount of the claim from the security
deposit and must return the remainder to the tenant within 30 days (from the
date of the notice of the claim). Any unsettled dispute the landlord and tenant
may have as to damages can be resolved in court.
General Landlord Duties
Landlords are required to deliver possession of the rental property to the
renter when the lease period begins. Failure to do so may entitle the renter to
sue for damages. A landlord must ensure that residential property is habitable.
This includes complying with all building, housing and health codes. Roofs,
windows, screens, doors, floors, steps, porches, walls and other structural
elements must be kept in good repair. Certain pests (e.g., rats, mice, roaches,
ants, bedbugs) must be exterminated, common areas kept clean, garbage removed,
heat made available in the winter, as well as heated, running water throughout
the year. Landlords requiring access to a tenant's residence for repairs must
give the tenant reasonable notice, which is defined as at least 12 hours prior
to entry. If a landlord fails to keep up with required repairs, a tenant should
give the landlord written notice of the noncompliance. If the landlord fails to
make the repairs within seven days of receiving notice, the tenant has the right
to terminate the lease.
General Tenant Duties
The tenant has a duty to pay rent on a timely basis, not to use the premises
for illegal purposes, to keep the premises clean and comply with all relevant
building, housing and health codes. The tenant does not have a duty to make
repairs, except to keep the plumbing clean and sanitary. The tenant must provide
the landlord with reasonable access to make any required repairs. Reasonable
access is defined as access between the hours of 7:30 a.m. and 8:00 p.m. Most
importantly, tenants have a duty not to damage the residence. If a tenant is in
noncompliance with these duties, a landlord should give the tenant written
notice of the noncompliance and has the right to terminate the lease if after
seven days the tenant has not remedied the problem.
Termination of a Lease
Florida law has certain notice requirements when terminating a lease. If a
lease is year-to-year, notice of termination must be made at least 60 days prior
to the end of the annual period. If a lease is quarter-to-quarter, notice of
termination must be made at least 30 days prior to the end of any quarter
period. For a month-to-month lease, notice of termination must be made at least
15 days prior to the end of the month. For a week-to-week lease, notice of
termination must be made at least 7 days prior to the end of the week. These
periods may be altered by a written lease in some instances.
Abandonment
If a tenant unjustifiably abandons a rental property, a landlord has the
right to repossess the property, which terminates the lease. The tenant is
liable for any unpaid rent prior to repossession and any extraordinary damages
done to the property. Another option for the landlord is to do nothing and sue
the tenant for rent as it comes due. Florida law, however, requires that
landlords mitigate damages. Purposely piling up damages (in the form of unpaid
rent) when the property could be rented to someone else will not be looked upon
favorably by Florida courts. Abandonment by a tenant is considered justifiable
where the landlord fails to keep the premises habitable.
Eviction
Under no circumstances may a landlord forcibly remove a tenant from rental
property. Instead, a landlord must bring an action for possession in court. A
landlord has the right to bring a possession action if the tenant holds over,
fails to pay rent or is otherwise in material breach of the lease agreement,
provided the landlord has given the required notice. In the event of a holdover,
the landlord is entitled to double rent.
After having been served with notice of the lawsuit, a tenant usually has
five days to answer. Failure to answer in five days means a default judgment in
favor of the landlord. If the tenant does answer, he or she may argue that the
landlord was not in compliance with the lease. Landlord/tenant disputes are a
summary procedure under Florida law and should receive an early trial date. In
the meantime, the tenant is required to pay rent into the court registry.
Discrimination in Housing
It is against Florida law to discriminate in the sale, rental, financing or
provision of real estate brokerage service in the appraisal of housing, or in
the advertising of a dwelling on the basis of race, color, religion, sex,
national origin, handicap or familial status. Persons who believe they may have
been discriminated against based on one of the above factors should contact the
Florida Commission on Human Rights to determine if they are eligible to file a
complaint under the Florida Fair Housing Act (see the Resources Section below).
Resources
The Mortgage Bankers' Association provides free booklets on home ownership
such as A Consumer's Glossary of Mortgage Terms, Self Test (helps
determine how much a consumer can afford to pay for a house) and What Happens
After You Apply for a Mortgage. To receive a copy of these or other
booklets, write to The Mortgage Bankers' Association, 1125 15th Street, NW,
Washington, D.C. 20005 or call (202) 861-6500.
The Federal National Mortgage Association (Fannie Mae) offers Unraveling the
Mortgage Loan Mystery, a publication which is available by calling (202)
752-7000.
The Federal Trade Commission Bureau of Consumer Protection offers The
Mortgage Money Guide which has information on comparison shopping for loans.
Write to the Federal Trade Commission, Public Reference Branch, Sixth Street and
Pennsylvania Avenue, NW, Washington, D.C. 20580. Their Web Site address is http://www.ftc.gov
and their phone number is (202) 326-2000.
The Consumer Information Center also has booklets on home buying, insurance, and
home hazards. Most booklets are free, but some cost up to $1.50. Write to the
Consumer Information Center, P.O. Box 100, Pueblo, CO 81002 for information.
The Florida Bar has pamphlets on buying a home and buying a condominium. For
copies of these pamphlets, call (904) 561-5834. You can also call Florida
Call-A-Law to hear recorded information on real estate issues at (904) 561-1200.
To contact the Florida Commission on Human Relations regarding a discrimination
issue, call (800) 342-8170.
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