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.