An offshore title search reported a lien of $850.00 for a city violation in Florida, while the payoff is close to $4,000,000.00. How is this possible? What went wrong? Who is on the hook?
Some of the large title vendors in the industry are playing a very dangerous game relying on offshore firms to run complete searches and feeding them directly through the client diligence systems. I have never seen such a large lien value mismatch in the history of our company. This makes me upset as a professional. I am not against offshoring per se, but if the service provider chooses to offshore their title searches, the onshore quality control should catch errors like this prior to the investor or client seeing them.
Let’s dive into an actual lien discussion. Most of the major cities in Florida have a Code Enforcement Department that can place a lien on the property for a number of municipal violations or infractions with a correction clause to enforce a daily fine against the property until the violation is cured or corrected. The appropriate method to estimating the lien amount on the property is to assume the violation is still unaddressed and the property lien is accruing the daily charges starting from the recording date of the city lien to present time. The lien might still be underestimated as it will not include interest and penalties. To find out the actual payoff on the lien, an unrecorded lien search
should be ordered which ProTitleUSA offers as an add-on service to our O&E Tax and Title dashboard. Many funds are making this service mandatory for NPL and REO property due diligence
. It makes a lot of sense financially, as the unrecorded lien search costs under $45 while the savings alone for this type of search can be thousands to a seller discount request.
The city puts a lien on the property
with daily fines, typically for failure to maintain the building exterior, issues with the roof, failure to meet city landscaping codes, fencing, pool maintenance, external structure hazards or large accumulations of trash.
On a property located in Coral Springs, Florida, the city had imposed six liens against it. An offshore title report captured the lien type correctly as a municipal city lien surviving foreclosure, but they reported the payoff as just the base lien amount without the daily accruals. If we did not review this search, the client would’ve ended up losing close to $4,000,000.00 on just one property alone.
Each city lien accrues daily fines as well as credit charges and inspection fees. Let’s break down how the payoff amount is calculated for each lien in this example. The oldest lien on the property was from 2010, which means that if not corrected, the total payoff is the number of days in a year multiplied by the daily violation fee, multiplied by the number of years that have passed since the recording of the lien. See lien copy below: