Sad Stories Make Good Lessons

Sad stories make good lessons. Don’t text and drive. Don’t share your passwords. And don’t spit in the wind. To those I’ll add this one: don’t buy real estate without title insurance.

A story in today’s paper tells the sad story: man buys beachfront condo at foreclosure sale; condo has two mortgages, not one; foreclosure was for second mortgage; buyer now has to pay first mortgage.

Here’s the lesson: get a title insurance commitment before you buy real estate. No matter who you buy it from: a neighbor, a friend, a family member, a Zillow ad, a real estate listing, or even on the courthouse steps in a foreclosure.

Here’s the reason: buying real estate is not like buying a car. Every car has a title certificate showing who owns it. But real estate is different: there is no title certificate for real estate. Instead, we have title insurance companies who research the chain of title to determine who owns it. Every single parcel of real estate in Florida is handled this way.

When the title company searches to determine who owns the real estate, they also search for mortgages. So, if there are two mortgages instead of just one, the title insurance company tells you that. But they don’t tell you that in a phone call or by email or text.

Title insurance companies give you what is a called a title insurance commitment. It reports the results of their title search by telling you who owns the real estate now and what mortgages and liens and things are against it. They cost anywhere from $50 to $2,000 depending on the real estate involved. The title commitment also tells you what they require to be done before they will insure the title.

That’s right. They will actually insure the title to the property. So if they missed something in their search, then their insurance should protect you from that error by paying you damages. For that, they charge a premium that is paid once at the closing, not annually, based on the purchase price. The seller usually pays that premium, but who pays it is actually negotiable.

Of course, if someone buys real estate at a foreclosure sale, the seller is not going to provide title insurance so you would have to get it yourself.

And you must have the title insurance commitment before you actually buy the property. If you get it afterwards, it’s too late to do anything about mortgages and other adverse things that appear on it. As the buyer in today’s sad story learned, the hard way.

I Want to Sign an Electronic Will

This is a reprint of my article published in the June 2009 issue of ALI-ABA The Practical Lawyer. It is being republished in this blog because the 2017 Florida Legislature passed HB277 allowing electronic wills as of July 1, 2017, and sent it to the Governor for signature. The Governor vetoed it on June 26, 2017.

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The time has come to sign my electronic will. Everything else I do is electronic: paying bills, reviewing files, researching Westlaw, talking to my children. Why not my will?  But does Florida presently recognize electronic wills? Wills that appear only on my computer screen and not on paper?  I think it does. Here’s why:

Wills Must Be In “Writing”

Let’s start with the  good only Florida Probate Code. It says that every will must be in “writing” (F.S. §732.502).  Does that mean it must be written on paper?  Not in Florida.  Florida has granted blanket approval to electronic writings in the very first section of the Florida Statutes:

The word “writing” includes handwriting, printing, typewriting, and all other methods and means of forming letters and characters upon paper, stone, wood, or other materials. The word “writing” also includes information which is created or stored in any electronic medium and is retrievable in perceivable form. F.S. §1.01(4)

So, anything that I can call up on my computer screen is a writing under Florida law. It does not matter what kind of electronic file it is, if I can retrieve it and perceive it, it is a writing. It can be a PDF, TIFF image, or Word file, and I think it satisfies the definition of a writing in Florida.

Testator and Witnesses Must “Sign”

But we hit a bump in the electronic wills road when we go to the next step: signing the will.  The Florida Probate Code requires that wills be signed by the testator and also by witnesses. How do you sign an electronic file?  You can’t sign the computer screen (though I remember from law school that a check can be written upon the back of a cow). What did the Legislature have in mind for signing these electronic writings?

The first section of the Florida Statutes does not define electronic signatures, and the Florida Uniform Electronic Transaction Act (F.S. § 668.50) states that it does not apply to a transaction “to the extent the transaction is governed by a provision of law governing the creation and execution of wills, codicils, or testamentary trusts.” But, back in 1996 the Legislature adopted the Florida Electronic Signature Act which says:

668.004  Force and effect of electronic signature.—Unless otherwise provided by law, an electronic signature may be used to sign a writing and shall have the same force and effect as a written signature.

668.003  Definitions.—As used in this act:
(4)  “Electronic signature” means any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing. A writing is electronically signed if an electronic signature is logically associated with such writing.

Notice that the statute does not require a digital signature, only an electronic signature. A digital signature must be obtained from Verisign or other companies and is more complicated than an electronic signature.  Here is what the Digital Signature Guidelines Tutorial of the ABA Section of Science and Technology Information Security Committee says about digital signatures:

Digital signatures are created and verified by cryptography, the branch of applied mathematics that concerns itself with transforming messages into seemingly unintelligible forms and back again. Digital signatures use what is known as public key cryptography, which employs an algorithm using two different but mathematically related keys…Computer equipment and software utilizing two such keys are often collectively termed an asymmetric cryptosystem.

Much less is required in Florida for an electronic signature: any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing.  So, it could just be typing your name.  If you ever filed online articles of incorporation or annual reports with the Florida Division of Corporations, you “signed” it by typing in your name.  That was you electronic signature.  You did not have to purchase a digital (crypto) signature from Verisign. You just typed in your name as your signature.

This somewhat informal means of signing is consistent with Florida common law.  In allowing testators to sign wills with marks rather than writing out their full names, the Florida Supreme Court held in 1966 that:

Rather, we hold, as do most jurisdictions, that a testator may sign his will by making a mark. It is a matter of fact to be proved in proper proceedings whether the testator made the mark with the intention that it evidence his assent to the document.

Estate of Williams, 182 So.2d 10 (Fla. 1966).

Scuttlebutt on Electronic Wills 

The commentators have been talking about electronic wills for years. Back in 1991, Professor Miller said:

Given contemporary advances in technology there is substantial ground for arguing that electronic or videotaped wills can serve all the functions of a written will and possibly even improve the intent-verifying and authenticating aspects of the traditional attested will.

Will Formality, Judicial Formalism, and Legislative Reform: An Examination of the new Uniform Probate Code “Harmless Error” Rule and the Movement Toward Amorphism, 43 Fla. L. Rev. 599 (Sept. 1991).

More recently, a Colorado commentator again questioned whether it is time for electronic wills and said:

Electronic signatures are becoming more frequent in “e-business” transactions. The use of this technology raises important questions for will drafters and probate courts in the twenty-first century. Could an electronic signature act as valid authentication for a will that exists only in electronic form and is stored on disk? Would an electronic will be more vulnerable to fraud and forgery than a written will? What issues are involved in the permanence and storage of electronic wills? Not surprisingly, recorded cases have [not] yet involved the validity of a will that exists only in electronic form.

Tucker, Swank & Hill, Holographic and Nonconforming Wills: Dispensing with Formalities, 32 Colo. Lawyer 53 (Jan. 2003).

And the discussion is not limited to Florida and the U.S.  In a recent article entitled A Critique of India’s Information Technology Act and Recommendations for Improvement, 34 Syracuse J. Int’l L. & Com. 1 (Fall 2006), Steven Blythe said:

Contract law worldwide has traditionally required the parties to affix their signatures to a document. With the onset of the electronic age, the electronic signature made its appearance. It has been defined as “any letters, characters, or symbols manifested by electronic or similar means and executed or adopted by a party with an intent to authenticate a writing,” or as “data in electronic form which are attached to or logically associated with other electronic data and which serve as a method of authentication.” An electronic signature may take a number of forms: a digital signature, a digitized fingerprint, a retinal scan, a pin number, a digitized image of a handwritten signature that is attached to an electronic message, or merely a name typed at the end of an e-mail message.

There is evidence that the aversion to electronic wills is beginning to dissipate. In 2005, Tennessee became the first American jurisdiction to recognize the legal validity of a will that is executed with an electronic signature. See Chad Michael Ross, Comment, Taylor v. Holt: The Tennessee Court of Appeals Allows a Computer Generated Signature to Validate a Testamentary Will, 35 U. Mem. L. Rev. 603 (2005).

Tennessee Upholds Electronic Wills

What? I had to read an article about technology law in India to find out that Tennessee has already upheld the validity of an electronic will.  So, how did the Tennessee testator sign his will?  In his comment, Chad Ross gave this account:

In January 2002, Steve Godfrey prepared a document “purporting to be his last will and testament.” Godfrey prepared the one page document on his computer and asked two neighbors to serve as witnesses to the will.  In the presence of both witnesses, Godfrey affixed a computer-generated signature using stylized font to the document. The witnesses then signed and dated the document in the presence of each other and Godfrey.

The expected litigation ensued between the will beneficiary and the intestate heir, with the heir claiming the will was not properly signed, but the comment reports that the Tennessee appellate court held that :a computer-generated signature made by a testator comes within the description of any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, and, if affixed before two or more attesting witnesses, satisfies the requirements for a testator to execute a will.”  The comment also reports that the court found that the testator “did make a mark by using his computer to generate his signature in the presence of attesting witnesses and intended this generation to serve as his signature” and that “this computer-generation, according to the court, was only a substitute for the use of an ink pen to affix the signature.”

In admitting an electronic will to probate, the Tennessee court did not require passage of a new probate law by the state legislature.  It relied only upon Tennessee’s existing probate code and the Tennessee statutory definition of a signature:

“Signature” or “signed” includes a mark, the name being written near the mark and witnessed, or any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, regardless of being witnessed. Tenn. Code §  1-3-105.

Tennessee’s statutory definition of “signature” is very similar to the Florida Electronic Signature Act of 1996: “Electronic signature” means any letters, characters, or symbols, manifested by electronic or similar means, executed or adopted by a party with an intent to authenticate a writing.”

As a reporter, Mr. Ross includes a detailed account of the history of signing wills in his University of Memphis Law Review article, which is highly recommended to the reader.  As a commentator, he concludes:

With the continuing changes in technology, the typical way of signing a legal document using an ink pen is no longer the only feasible option. … With its holding in Taylor, the Tennessee Court of Appeals becomes the first in the nation to rule on the validity of a testator’s computer-generated signature. …[T]he court has issued a well-founded opinion that proves that the statute of wills can accommodate the advances of technology without sacrificing the goals that underlie the statute. At least in this area of probate law, Tennessee now leads the way, and other states are likely to follow.

Let Florida be next.  I want to sign an electronic will.

Some Steps to Take When Someone Dies in Florida

When someone dies in Florida, here are some first steps to take for legal matters:

1. Find Original Will. Find the original, signed last will and testament, then give it to your lawyer. The Florida Probate Code requires that it be filed with the Court within 10 days after learning of the death.

2. Secure Home. The deceased person’s home should be locked and secured by the person named in the will as personal representative. That person should verify that there is a current homeowner’s insurance policy. No mail should be discarded. In fact, nothing in the house should be taken or discarded because the court has not yet decided who is entitled to it.

3. Secure Vehicles. The decedent’s motor vehicles should be parked and locked. Florida law holds the probate estate liable for any accidents that occur with the vehicle so vehicles should not be driven by anyone. The person named as personal representative in the will should verify that there is a current automobile insurance policy on each vehicle.

4. Engage a Probate Lawyer. The person named in the will as personal representative (PR) should engage a Florida probate attorney as soon as possible. In Florida, the attorney works for the PR and not for the estate or its beneficiaries or creditors. Therefore, it is wise for each beneficiary and each creditor of a deceased Florida resident to engage a Floridaprobate lawyer too.

5. Petition for Appointment as Personal Representative. Generally, the person named as personal representative in the last will and testament has no power to act until a court order is entered appointing the personal representative. The lawyer will prepare the petition and other documents needed by the Pinellas County probate court before an order can be entered.

These are just some of the first steps that should be taken when someone dies.

What is Summary Administration in Florida Probate?

If a Florida resident dies owning less than $75,000 in assets, then it might be possible for have a shortened form of probate proceeding called summary administration.

In a summary administration, the probate court can admit a will to probate, but instead of appointing a personal representative the court order can list the assets owned by the decedent and declare them to be owned by the beneficiaries. Because no personal representative is appointed, there is no ongoing probate proceeding, no inventory or accountings to file, and no discharge order to be entered.

However, a notice to creditors should still be published and served on all possible creditors in order to limit their time to file a claim. If this is not done, then creditors might have up to two years after death to file a claim.

The beneficiary of a Florida resident whose estate can be subject of a summary administration should engage a Florida probate lawyer to represent the beneficiary and prepare the legal documents for the summary administration.

What Happens When a Florida Resident Dies Without a Will?

When a Florida resident dies without a will, they are said to die intestate. When a Florida resident dies with a will, they are said to be testate. A will names beneficiaries who receive the estate assets after payment of expenses, taxes and claims and names a personal representative (PR) to collect the assets, pay the bills, and distribute the estate. So when someone dies in Florida without a will who gets the assets and who acts as PR?

The answer is in the Florida Probate Code. If the Florida resident left a spouse and children, then they are the beneficiaries. If not, then it passes to the resident’s parents. If they are deceased, then it passes to siblings and descendants of deceased siblings.

The PR of an intestate estate is generally the spouse, but if none then the children and on down in the order of beneficiaries.

So, it’s always best to make a will while you’re alive and well so that the beneficiaries and PR are the persons you want them to be.

How Many Kinds of Deeds Are There in Florida?

When you buy real estate in Florida and when you sell real estate in Florida, it’s important to think about the kind of deed to convey real property.  There are many kinds of deeds in Florida. Here are a few of them:

If you are the buyer, you want the seller to sign a statutory warranty deed because it means the seller gives various warranties to you, such as a warranty of title. If the title fails, then you could sue the seller for breach of warranty. This is the type of deed that is usually prepared by lawyers and title insurance agents for closings in Florida. It is the type of deed specified in the form contracts issued by the Florida Association of Realtors and The Florida Bar. But, there is no law that says it must be used.

If you are the seller, you want to sign a fee simple deed because it contains no warranties but it still purports to convey fee simple title. If the contract or buyer require a warranty deed instead of a fee simple deed, then the seller can try to negotiate to sign a special warranty deed which gives the warranties only for the period of time that the seller owned the property.

If you are a trustee, personal representative or guardian, then you want to sign a special type of deed for that capacity, which is similar to a fee simple deed and gives no warranties because it would obligate the trust, estate or guardianship beyond the term of your office.

If you are not sure whether you really own the property, then you want to sign a quit claim deed. Nonlawyers sometimes mistakenly call this a quick claim deed but the correct name is quit claim deed. Doing this means you quit claim your interest to the grantee, meaning that you only convey to the grantee whatever interest you have in the property, and if you have no interest in the property then you are conveying nothing.

Of course, it’s very important to have your own attorney review any deed before you sign it. And it’s imperative that a title search and title insurance be obtained from a licensed title insurance company before you sign a deed, too.

Joint Property and Probate in Florida

Florida recognizes three types of joint property: tenancy in common, joint with full rights of survivorship, and tenancy by the entirety. Only the last two avoid probate. Here’s the background.

When two people own property as tenants in common, each owns an undivided interest in the whole.  If one dies, then probate is required to deal with title to the property of the one who died.

When two people own property as joint tenants with full rights of survivorship, then each still owns an undivided interest in the whole, but when one dies his or her title automatically passes by operation of law to the surviving owner without probate. (There is controversy in Florida now whether creditors of the decedent can reach the joint property even though it does not pass through probate.)

When two people own property as tenants by the entirety, you know they are married because that form of ownership is reserved for married couples. The concept dates back to jolly old England hundreds of years ago when the property owned by husband and wife as tenants by the entirety was considered a “moiety” of title which could only be broken by voluntary act of both spouses. Thus, creditors of just one spouse could not reach tenancy by the entirety property. That rule still applies in Florida, which makes tenancy by the entirety a popular way for married couples here to hold title. In fact, Florida recognizes tenancy by the entirety in both real property like houses and in personal property like bank accounts and investments. And, of course, it avoids probate at each because tenancy by the entirety property passes automatically by operation of law to the surviving spouse.

Let’s apply the above concepts to a typical factual situation. A husband and wife in Florida own investment real estate as tenants by the entirety. One dies, and the property automatically becomes solely owned by the surviving spouse without probate.  Should he or she then add the children to the deed as joint owners with full rights of survivorship in order to avoid probate at her death?

Let’s suppose she did and then suppose that one of the children later has a nasty divorce proceeding and another child later has problems with credit card debt.  Can the children’s spouse and creditors reach the children’s interest in the joint property?  Yes, they can. This is a huge risk for anyone who adds someone else as a joint owner to their property for the purpose of avoiding probate.  While it might avoid probate at their death, it places the property at risk of being reached by the new joint owners’ present and future spouses and creditors.

Conclusion: It is simple to put property into joint names in Florida, but the effect is not so simple. Probate might be avoided, but at the risk of loss of the property before then to creditors of the new joint owners. There are other ways to deal with this problem. Ask your Florida lawyer.

Which State’s Laws Apply When Someone Dies Owning Real Property in More Than One State?

Many Florida residents own real property in other states. So, a frequent question is: which state law applies when a decedent owns assets in more than one state?

The answer depends on two things:

1.  Domicile of Decedent. The first question is where was the decedent’s domicile at date of death? Domicile generally means the place where someone intends to permanently reside. It is complicated because domicile is not always the same as residence. There are many factors involved in determining domicile: sleeping place, working place, driver license, voter ID, auto registration, mailing address, tax return address, phone, number of days at each place, etc. For some people, all of these are the same place. But for other people, their driver license is from Florida but they have a second home in another state.

2. Type of Asset. Generally, Florida law applies to land, buildings and other real property located in Florida no matter where the decedent was domiciled at death. Similarly, if a Florida resident owned real property in another state, then the law of that state would apply to that real property. But, for all bank accounts, stocks, bonds, mutual funds, and other personal property, the law of Florida generally applies as to Florida residents.

This means that if a Florida resident dies, then his or her will should be filed first in Florida as the domicile state, and the probate proceeding here is called the domiciliary probate proceeding. Then an exemplified copy of the will and court documents are sent to the other state where real property is located and an ancillary probate proceeding is filed there.

Does the Buyer of Florida Real Estate Need a Lawyer?

Whether you are buying a home, vacant land or an office building, the real estate buyer needs a lawyer.  Why?  Because the buyer’s goal is to get what is paid for.  But real estate is complicated and there are many pitfalls.  There is usually no one else to watch out for the buyer’s interest if the buyer does not hire a lawyer.  The brokers are paid by the seller, and the title insurance agency handles the closing paperwork without representing either side.  The lawyer’s job is to help the buyer prepare and negotiate a purchase contract, help the buyer through the buyer’s due diligence inspection period, and then review deed, title insurance commitment and other closing documents on behalf of the buyer.  The real estate buyer’s lawyer can do the following:

1. Due Diligence Period. The lawyer can assist in preparing and negotiating a contract for purchase of the real property that includes a due diligence inspection period with broad wording to allow the buyer to check for obvious (patent) and non-obvious (latent) defects.  These might be in the building, land, air or water.  They could be environmental, structural, mechanical, electrical, or otherwise. The buyer might remember the Latin saying, Caveat Emptor, which means “Let the buyer beware.”  This meant that the seller was not obligated to tell the buyer about defects known by the seller.  While this ancient rule of law has changed with regard to residential real estate, it still applies in Florida to commercial real estate, so it is even more important for commercial real property buyers to do their due diligence inspections.  However, it is still important for residential buyers to inspect because sellers are not obligated to tell about defects they are not aware of so the buyer might discover something unknown to the seller.  In addition, if the residential seller fails to disclose a known defect and is liable to the buyer for not doing so, the seller might not have enough money left to pay the buyer damages for the nondisclosure. If the buyer does not discover the defect until after the closing, then it is too late to back out of the transaction without expensive litigation.

2.  Clear Contract.  The lawyer can assist in drafting a clear contract that gives the buyer what the buyer expects to buy in the transaction.  Sometimes this is done with a standard form such as the FAR/Bar form issued by the Florida Bar and Florida Association of Realtors or the FAR forms issued by the Florida Association of Realtors. The lawyer often prepares addenda to these standard forms to clarify aspects of the transaction.  Sometimes, however, the lawyer prepares a form specifically for the particular transaction rather than using a standard form that has many provisions that are not applicable to the particular case.  Unlike real estate brokers, lawyers are trained in the art and use of words and the drafting and interpretation of contracts.

3. Deadline Follow-up. All contracts for the purchase of real property should include deadlines for such matters as inspections, financing, title insurance, surveys, closing, etc.  To avoid breaching the contract, it is important to comply with these deadlines.  The lawyer can assist the buyer in scheduling contract deadlines.

4. Review Closing Documents and Include Protections. Legal documents can be written to include representations and warranties that are binding upon sellers after the closing in a way that may obligate them to pay damages to the buyer even years after the closing, but sellers try to avoid this wording so that any discovered defects are buyer’s sole problems, if the buyer does not have an attorney the buyer may not have the benefit of including this wording in the contract, deed and other documents.  Since the seller’s only goals are to get paid (and stay paid) and avoid litigation (see companion article on this website), it is important to include seller’s representations and warranties in contracts and deeds. Lawyers know which warranties and representations are standard and which are not, which can be negotiated in and which are more difficult to include.

5. Cost-Benefit of Legal Advice. The benefits of having a lawyer come at a cost: legal fees. Buyers who do not have lawyers do not pay legal fees; at least, not unless or until a breach or defect is discovered. Legal fees in litigation are expensive because it is fueled by opposing parties with opposing claims and positions.  Legal fees paid to a buyer’s lawyer to advise the buyer before signing a contract to purchase and before closing on the contract are much less than legal fees in litigation. There is no crystal ball to determine in advance whether a particular deal will result in litigation so it is best to hire a lawyer to assist in assessing and minimizing the risks of the purchase transaction to the extent possible.

Therefore, the buyer of Florida real estate, whether it is residential or commercial, should always engage a Florida lawyer to assist in the transaction. Otherwise, there is really no one legally on the buyer’s side.

Does the Seller of Florida Real Estate Need a Lawyer?

Whether you are selling a home or an office building, the real estate seller needs a lawyer.  Why?  Because the seller has two goals: get paid and avoid litigation. The lawyer’s job is to help the seller get paid by preparing and negotiating a sales contract, helping the seller through the buyer’s due diligence inspection period, and then either preparing closing documents and handling the closing or reviewing closing documents and providing advice or attending the closing.  The real estate seller’s lawyer can do the following:

1. Clear Contract. Litigation is less likely with a clear contract, so the lawyer can assist in preparing and negotiating a clear contract for sale of the real property.  Sometimes this is done with a standard form, such as the FAR/Bar form issued by the Florida Bar and Florida Association of Realtors or the FAR forms issued by the Florida Association of Realtors. The lawyer often prepares addenda to these standard forms to clarify aspects of the transaction.  Sometimes, however, the lawyer prepares a form specifically for the particular transaction rather than using a standard form that has many provisions that are not applicable to the particular case or that are more favorable to the buyer.  Unlike others parts of the real estate sales team, lawyers are trained in the art and use of words and the drafting and interpretation of contracts.

2. Deadline Follow-up. All contracts for the sale of real property should include deadlines for such matters as inspections, financing, title insurance, surveys, closing, etc.  To avoid litigation, it is important to comply with these deadlines.  The lawyer can assist the seller in scheduling contract deadlines in order to achieve the goals of getting paid and avoiding litigation.

3. Limit Liability in Contract, Deed and Closing Documents. Legal documents often contain representations and warranties that are binding upon sellers after the closing in a way that may obligate the seller to pay damages to the buyer even years after the closing.  Since the seller’s only goals are to get paid (and stay paid) and avoid litigation, it is often important to limit the seller’s representations and warranties in contracts. Lawyers know which warranties and representations are standard and which are not, which can be negotiated out and which must stay.

4. Cashier’s Check or Wire Transfer at Closing. The seller must accept only a cashier’s check or a wire transfer of net proceeds at the closing. If the seller accepts a title agency’s escrow check, then the seller accepts the risk if the check fails.  While most title agencies are reputable, there is no way to tell whether its escrow check will be honored by your bank.  If it is not, the seller loses and the buyer gets to keep the deed. (There is a Florida case directly on point that so holds.) So, it is essential that the seller only accept a cashier’s check or wire transfer at closing.

Therefore, the seller of Florida real estate, whether it is residential, industrial, or commercial, should always engage a Florida lawyer to assist in the transaction.

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