Florida Law
Florida Residential Real Estate Law
- 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.