Who Pays Owner’s Title Insurance in Florida?
Understand Florida's owner's title insurance custom: learn who typically pays, common exceptions, negotiation factors, and how costs are determined.
Owner’s title insurance is a financial safeguard designed to protect a property owner’s legal rights to their real estate. It provides coverage against potential financial losses and legal expenses from defects or issues affecting the property’s title. This coverage is distinct from other forms of property insurance, as it addresses past events that could impact ownership rather than future incidents.
Purpose of Owner’s Title Insurance
Owner’s title insurance protects against various title defects that could jeopardize ownership. These issues include undiscovered liens, such as unpaid taxes or outstanding mortgages from previous owners. The policy also guards against fraudulent deeds, forged documents, or errors in public records that might cast doubt on the chain of ownership.
Protection extends to claims from undisclosed heirs, unknown easements that could restrict property use, or boundary disputes not apparent at the time of purchase. Should any of these hidden hazards emerge, owner’s title insurance covers legal fees to defend the owner’s title and compensates for financial losses up to the policy’s limit. This protection helps secure a buyer’s investment from unexpected claims or legal challenges.
Standard Practice for Payment in Florida
In Florida, a long-standing custom dictates that the seller typically pays for the owner’s title insurance premium. This practice is rooted in the seller’s obligation to deliver a clear and marketable title to the buyer, ensuring the property is free from encumbrances or defects. This “seller pays” tradition is reflected in market practices across many Florida counties, distinguishing it from customs observed in some other states.
While this custom is widespread, it is not a statewide law. Specific counties, such as Miami-Dade, Broward, Collier, and Sarasota, have a different custom where the buyer traditionally pays for the owner’s title insurance. Standard real estate contracts, including those commonly used by Florida Realtors and the Florida Bar, often reflect these regional customs.
Negotiation and Contractual Agreements
Despite customary practices, the responsibility for paying owner’s title insurance is negotiable between the buyer and seller in Florida. The final agreement on who pays is explicitly stated within the real estate purchase contract. This contractual agreement supersedes any regional customs, making a thorough review of the purchase agreement important for both parties.
Specific scenarios can alter the customary payment arrangement. In real estate owned (REO) or foreclosed properties, selling lenders or banks often stipulate that the buyer is responsible for the owner’s title insurance. In short sales, the terms set by the bank may shift this cost to the buyer. For VA loans, while a lender’s policy is mandatory, VA guidelines can influence the payment of the owner’s policy, often encouraging the seller to cover it to comply with VA requirements.
Cost of Owner’s Title Insurance
The premium for owner’s title insurance is a one-time fee, typically paid at the closing of the real estate transaction. This single payment provides coverage for as long as the insured owner or their heirs retain the property. The cost is calculated based on the property’s purchase price, not on an annual premium basis.
Florida’s Office of Insurance Regulation sets promulgated rates for title insurance, meaning premiums are largely uniform across title companies for the same coverage amount. For properties up to $100,000, the rate is typically $5.75 per $1,000 of the purchase price. For values exceeding $100,000 up to $1,000,000, an additional $5.00 per $1,000 is applied. The title company or closing agent collects this premium at closing.