One Million Dollar Error: A Real Example of Wrong Title Due Diligence


I wanted to share with you an example of when poor title exam is conducted during loan acquisition due diligence, which cost the client close to one million dollars. When investors acquire NPL (non-performing loans) assets, title search and BPOs are typically necessary steps for running acquisition due diligence; however, title search exam or review is a mandatory and important step in the overall due diligence approach. In my mind, lien and judgment interpretation by a senior title examiner must be performed to accurately represent the lien attachment to the property and the accurate payoff. The case I am about to present had an accurate title search but wrong title exam performed by an untrained examiner (I will not get into details on how important the vetting process should be to control who touches your files on diligence).


Florida is known for strict regulations and ordinances by the townships due to code enforcement violations. Other states such as New York, Ohio, Indiana and Maryland are in the top of the list for tough enforcement areas by municipalities.


Let’s break down the case of Florida code enforcement violations with per day fines, recorded as an “Order Imposing Fine Against the Property”. During the title search on the property in Hillsborough county, the searcher reported an Order Imposing Lien against the respondent, who is the owner of the property. The case was filed by the township in 2005 before the Board/Special Magistrate presenting the evidence of county findings related to roof condition and exterior wall replacement or repair. The county served the owner of the property the affidavit and notification of violation, which was ignored by the owner. Remember, the lender is yet to get involved or served. The County Enforcement Board filed an order to comply within a certain timeframe given by the court; otherwise, a daily fine will be accrued. In this case, the fine was set at $250.00 per day until compliance is achieved. This order becomes a senior lien ahead of any mortgage or HOA, independent of the recording date.
If you do the math on the number of days lapsed since the recordation of the lien, the payoff will be in the range of $1,000,000+. In most cases, the investor would drop this loan from the trade due to the amount of the lien that attaches to the property being so high. However, the title examiner reviewed the lien and reported to the client who acquired the non-performing loan that the lien amount was $250.00 in total. While there is some room in negotiation with the county on municipal liens, a million dollar lien can never be negotiated to zero.

At minimum, the county enforcement board will require an investor to repair or replace issues in violation before considering discounting the total accrued fine. The list of repairs is typically listed in the order itself. See example below:
Some townships will require code enforcement searches on top of the title search reports in the course of the due diligence, as the data we presented in this post was a recorded lien in the county records, while the next example is an unrecorded lien kept at the township office code enforcement department. One of ProTitleUSA’s clients orders Code Enforcement searches with every NPL acquisition just because of the case below. The unrecorded code enforcement lien in Florida township ended up to be $265,000 while not recorded in county records. The lien condition is easily curable, but since it was not cured for a long time, the fine accrued to a significant amount. The lien was for unlicensed vehicles, outside unpermitted storage, junk and trash on the property with a $250.00 per day violation.
After a Surfside condominium collapse in Miami with many victims, all townships in Florida are reviewing their inspection strategies and enforcement to avoid future disasters, such as this catastrophic failure. The City of Miami reported in August of 2021, that the condo building had code enforcement violations that caused collapse. Inspections will get more frequent and new and more expensive enforcement measures will likely be deployed. Any property condition violations, such as building, supporting structures, sink holes, concrete deteriorations, cracks, structural damages and many more possible violations will be monitored by counties and townships. Early identifications of these issues from recorded and unrecorded lien review is not just recommended but required in my opinion.