Know Before You Buy: Top Issues for South Florida Real Estate Buyers and Investors
As a buyer or investor in Florida real estate, it is helpful to familiarize yourself with various legal concerns that may arise in any real estate transaction. Among the most relevant legal issues for buyers are two separate, but related, matters: property ownership structure and title clouds.
Property Ownership Structures
There are various ways to structure property ownership, each with its pros and cons. Potential homebuyers should consider the legal ramifications of each ownership structure, as they will ultimately determine who holds title to the property.
Buyers and investors may purchase property through a business entity such as an LLC or corporation. A major benefit of buying property through an LLC, for example, is that it provides liability protection and anonymity. However, LLCs have financial requirements such as annual fees and owners of LLC property cannot apply for homestead exemptions.
A real estate trust provides owners with full control over property during their lifetime. Property in trust passes directly to owners and avoids probate. One downside of the trust is that they often have rules that limit how realty is handled. However, they have other benefits, such as the Delaware Statutory Trust, which is an attractive option for certain investors due to its tax benefits.
For joint owners who are not purchasing property through a business structure or trust, the most common type of property ownership is the tenancy in common, whereby two or more people who are unmarried take title to the property together. Owners of a tenancy in common can sell their share of the property without consulting with co-owners. An advantage of this structure is that owners can pass the property without needing co-owner assent. However, a disadvantage is that the remaining owners may end up owning property with complete strangers.
A joint tenancy with right of survivorship is an alternative method that is popular among family members, under which all co-owners take title simultaneously and share equal interest in the property. This method can be advantageous for unmarried couples and partners who want to pass their property and avoid probate, but it can be a disadvantage to co-owners, as they may be exposed to creditors.
A tenancy by the entirety may be used by married couples purchasing property. This method provides certain protections from creditors and other benefits, including avoiding probate. A disadvantage of this structure is that the spouse is the only beneficiary.
The simplest way to own property in Florida is via sole ownership. Generally, this structure is appropriate for buyers who are unmarried or those who want to assume title for investment purposes. This method of homeownership provides little to no tax or estate planning benefits and offers no protections against potential liability claims.
Avoiding Title Clouds
Whatever way you choose to own your Florida property, the property’s ownership will be reflected in the title to your property, which vests with the buyer.
Title is the official determinant of the right to ownership of the land. Under Florida law, land records that are recorded with the state establish the legal title to property. These records show the title owners for a given piece of property. As a buyer, you want to ensure you receive marketable title free of title “clouds,” such as errors in documents in the chain of title or unsatisfied liens, unpaid taxes, foreclosure and other issues. These issues can “cloud” your ownership interest. That is why it is important to consult with a Florida real estate attorney who will work to identify and resolve any title issues prior to closing.
Contact a Proven Real Estate Lawyer Today for Assistance
If you have questions or concerns prior to making a real estate purchase or proceeding with an investment opportunity, it is important for you to seek legal guidance from a skilled real estate lawyer as soon as possible. Contact our office today for help.