Real Estate

Remote Online Notarization

With a new year came a new change to the Florida notary statute. Beginning on January 1, 2020, remote online notarization procedures are now authorized for real estate closing documents and other documents that require a notary acknowledgment. Previously, a notary and a person signing a document requiring a notary acknowledgment had to be in the same physical location and in close proximity to each other. In recent years, technology has progressed to the point where some documents could be executed electronically by both the signatory and the notary, but both parties still had to be in the same location. However, the same location and close proximity are no longer required with the new change. 

The Florida Statutes define online notarization as the performance of a notarial act using electronic means in which the principal appears before the notary public by means of audio-video communication technology. Such communication technology must meet certain statutory requirements and must provide for real-time, two-way communication using electronic means in which participants are able to see, hear, and communicate with one another. Online notaries will contract with third-party provides for this communication technology and the related services necessary for remote online notarization. These third-party providers will also provide credential analysis and identify proofing, which are both required when an online notary does not personally know the person signing a document. Credential analysis affirms the validity of a government-issued form of identification, and identity proofing affirms the identity of an unknown individual through a knowledge-based authentication process consisting of 5 questions about the unknown individual from public and proprietary sources. 

In addition to these technology requirements, someone who is already a notary must also satisfy other requirements before they are authorized to serve as an online notary public. These additional requirements include: completing a course covering the duties, obligations, and technology requirements for serving as an online notary; submitting an online notary registration to the State of Florida; identifying the third-party provider that the online notary intends to use, and confirming that the chosen provider satisfies the statutory requirements; and providing proof of a $25,000 bond and errors and omissions insurance covering acts as an online notary. 

One of our experienced attorneys can help you with your notarization questions, as well as closing your real estate transactions. 

Real Estate

The Benefits of Hiring an Attorney When Purchasing a Home

 When purchasing a home, many legal issues can arise. Hiring an experienced real estate lawyer who is trained to handle the purchase and sale of real property is helpful to navigate the process. 

One of the most important aspects of any real estate deal is the contract. Although standard real estate forms may be used, an attorney can help you understand certain terms that can be confusing. They may also recommend the addition of specific language to reflect the buyer and seller’s agreement and wishes. Attorneys will work with your real estate agent in negotiating contractual terms on your behalf. It is important to ensure that your contract is in compliance with all state laws and county ordinances, and it should address any specific problems that might affect the future use of the property. 

Another important part of a real estate transaction is title insurance. Once you have signed the contract, you will need to obtain title insurance to ensure that the property is free of any encumbrances, such as liens or judgments, that would prevent the seller from having marketable title. A real estate attorney will examine recorded documents affecting title to the property, and then apply the Florida Uniform Title Standards to any title problems that arise during this review. Your attorney can explain the effect of any easements on the property as well as prior agreements or restrictions that were enforced by a prior owner. If the search reveals something problematic relating to title on the property, your attorney can advise you on how to proceed. 

Once you are ready to close on the property, your attorney can prepare all the important closing documents, such as the deed and the closing statement. Your attorney can help you understand the nature and amount of the closing costs, as well as provide advice as needed should any issues arise during the closing process. Once the deed and the mortgage paperwork are signed, your attorney can file and record these documents in the applicable county according to state law. 

Obtaining an attorney is extremely beneficial when it comes to the intricacies involved in real estate transactions. Buying a home is one of the largest purchases you will ever make. An experienced real estate attorney helps to represent your best interests and ensures that the entire process follows the applicable laws of Florida and the county in which the property is located. 

Estate Category

Secure Act and Its Impact on Retirement Plans

 On December 20, 2019, the President signed into law the “Setting Every Community Up for Retirement Enhancement” Act (the SECURE Act). The Secure Act modified many requirements for employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts. Most of the provisions go into effect this year (2020). Now is a good time to review and consider how these new rules may affect your tax and retirement-planning situation. 

Below is a brief overview of some of the key provisions of the Secure Act that may act on an individual’s retirement planning and tax and estate planning. 

Elimination of any age restriction for traditional IRA contributions. 

Prior to 2020, once an individual attained the age of 70 ½, he or she were not allowed to make traditional IRA contributions. Beginning in 2020, the Secure Act allows an individual of any age to make contributions to a traditional IRA, as long as the individual is working and has earned income. 

Required minimum distribution (RMD) age raised from 70½ to 72. 

Before 2020, retirement plan participants and IRA owners were generally required to begin taking RMDs, from their plan by April 1 of the year following the year they reached age 70½. For distributions required to be made after Dec. 31, 2019, for individuals who attain age 70½ after that date, the age at which individuals must begin taking distributions from their retirement plan or IRA is increased from 70½ to 72. 

Reduction of Stretch IRAs. 

For deaths of plan participants or IRA owners occurring before 2020, beneficiaries (both a spouse and non-spouse) were generally allowed to stretch out the tax-deferral advantages of the plan or IRA by taking distributions over the beneficiary’s life or life expectancy (in the IRA context, this is sometimes referred to as a “stretch IRA”). However, for deaths of plan participants or IRA owners beginning in 2020 (later for some participants in collectively bargained plans and governmental plans), distributions to most non-spouse beneficiaries are required to be distributed within ten (10) years following the plan participant’s or IRA owner’s death. This change eliminates the ability to “stretch” out the tax deferral over the beneficiary’s life. 

This 10-year rule requirement does not apply for distributions to (1) a surviving spouse of the account owner; (2) a minor child of the deceased account owner; (3) a disabled or chronically ill individual; and (4) any other individual who is not more than ten years younger than the account owner. These beneficiaries who qualify under this exception may generally still take their distributions over their life expectancy (as allowed under the rules in effect for deaths occurring before 2020). 

In addition to the foregoing changes, the Secure Act made the following changes and/or additions: (a) tax free or qualified distribution from a Section 529 savings plans to cover registered apprenticeships and to repay qualified student loans; (b) plan distributions (up to $5,000 per individual (or $10,000 for married couple)) used to pay expenses relating to birth or adoption for expenses related to the birth or adoption of a child are not subject to the 10% early withdrawal penalty for individuals under age 59 ½; (c) taxable non-tuition fellowship and stipend payments are now allowed to be treated as compensation for IRA contribution purposes, and therefore, the payments may be contributed by the individual to an IRA; (d) allow annuity and lifetime income option within employer plans; (e) incentives for business owners with 100 or fewer employees to establish a retirement plan (tax credits are increased from $500 to up to $5,000 for new plans); and (f) certain long-term part-time employees who work at least 500 hours in at least 3 consecutive years will be eligible to participate in their employers 401(k) plan (starts in 2021). 

With the start of a new year, it is always a good time to review and revisit your retirement plan and to consider tax and estate planning ideas. We recommend that you seek competent tax and legal counsel in tax estate planning and consult with your financial/investment advisor concerning your retirement plan. 

The Qualified Target Industry Tax Refund

By: Zachary Brown

A tax incentive is a way that the government can encourage or attract certain economic activities to a particular area. Tax incentives typically are aimed at attracting investment as a way of increasing employment, economic output, research and technology development, and improving infrastructure to surrounding areas. Tax incentives are offered at the federal, state, and local level through a variety of different means and mechanisms. The Qualified Target Industry Tax Refund (QTITR) is one type of incentive offered by the State of Florida

The QTITR is a tool the State of Florida offers to communities to encourage job growth in industries that the state has prioritized because of the types of jobs those industries create or the services they offer to surrounding communities. The Qualified Target Industry Tax Refund allows a company to recoup some of the taxes it pays based on certain economic activity the company creates. Some of these taxes include corporate income, sales, ad valorem, intangible personal property, and other various taxes levied by the government. The program’s rules state that no more than 25 percent of the total refund approved may be taken for a single fiscal year and that a qualified business may receive no more than $1.5 million in tax refunds for a single fiscal year.

So how does a business qualify for the QTITR? Well, a business must first be a Qualified Target Industry (QTI). QTIs are the businesses that Florida is looking to attract to the state. Broadly speaking, QTIS are in certain industries that include cleantech (such as sustainability and biomass technology companies), life sciences, infotech (such as digital media and software companies), aviation and aerospace, homeland security and other defense companies, and financial/professional services. While some businesses may consider themselves on the edge of one of those categories, it should be noted that Florida Statutes expressly provide that a QTI is not “any business subject to regulation by the Division of Hotels and Restaurants or the Department of Business and Professional Regulation.”

All business ventures are evaluated on an individual basis, so don’t assume by operating in one of the above mentioned QTIs automatically indicates eligibility. To determine eligibility, an application is submitted to Enterprise Florida (EFI). EFI is a public-private partnership between Florida’s business and government leaders. It is the principal economic development organization for the State of Florida and the Chairman of the EFI board is Governor Ron DeSantis. EFI will evaluate a certain project or business venture based upon how many full-time jobs are created and the annual wages those jobs pay. There are several other minor economic factors that EFI evaluates before pre-approving the application and sending it off to the Department of Economic Opportunity (DEO).

The DEO is the Florida agency that gives a final decision on whether a business will receive the QTITR. The amount of the tax refund provided by the DEO varies depending on each situation. The DEO provides the applicant with a letter of certification approving or denying the applicant’s request. The applicant and DEO then work to sign a written tax refund agreement that includes the specifications of what kind of refund the applicant will receive.

There are many rules and regulations when applying and attempting to receive the QTITR, so it is important to navigate the process as carefully as possible. As always, seeking the help of counsel to navigate this process is a good idea.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Estate Category

How Assets Transfer When a Person Dies

When a person dies their assets generally transfer to a new owner in one of four ways as follows: Joint Owner with Survivorship Rights; Payable-On-Death/Transfer-On-Death/Beneficiary Designation (“Beneficiary Designation”); via Probate; or via a transfer to a Trust. 

If an asset is owned with a joint owner who has survivorship rights to said asset, the surviving joint owner(s) automatically owns the asset free from the probate process upon the other joint owner’s death. Common assets that have joint owners with survivorship rights are: bank accounts; real property and investment accounts. 

If an asset has a Beneficiary Designation, the named person(s) to receive the asset will be able to claim said asset free from the probate process upon the owner’s death. Common assets that have Beneficiary Designations are: bank accounts; retirement accounts; life insurance; annuities; real property; corporate interests and investment accounts. 

Probate is a circuit court proceeding in which assets are transferred to new owners upon a person’s death. All assets that are not transferred by some other means (to avoid probate) are subjected to probate administration and thus subject to the terms of a person’s Will (if they have one). If you die without a Will and have assets that are subject to probate administration, any interested person can petition the court in order to distribute your assets according to state laws. I view a Last Will and Testament (more commonly referred to as a “Will”) as a necessary estate planning document for most people but I also see the Will as a safety net to catch assets that a person has failed to transfer via other methods such as joint ownership with survivorship rights, Beneficiary Designation, or by a transfer to a trust. There is a common misconception that the only estate planning document needed is a Will, however, a Will alone (without proper planning and understanding of how the Will operates) is not likely to avoid issues following a person’s death. 

If an asset has been properly transferred into a Trust during a person’s lifetime or by a Beneficiary Designation, the Trust’s terms shall govern the administration and distribution of said asset until the Trust has fulfilled its purposes and the asset will avoid the probate process. The depth of this article will only allow for discussion on the most common type of trust which is known as a revocable trust or a living trust (“Revocable Trust”), However, many types of trusts exist for many different purposes. 

A Revocable Trust is a legal document that is established during a person’s lifetime which usually directs that the trust’s assets and income are to be used for the person’s benefit during their lifetime and also designates beneficiaries to receive said assets after the person’s death. A Revocable Trust, like a Will, can be amended at any time by the creator of the trust who is known as the “Grantor” as long as he is living and maintains legal capacity. The person in charge of the trust with legal authority to manage the trust is known as the trustee (“Trustee”). The Trustee administers the trust for the benefit of the Revocable Trust’s named beneficiaries. Usually, the 

Trustee is the Grantor during his lifetime and then a successor trustee is named to take over the trustee role upon the Grantor’s death. 

After creating a Revocable Trust, the Grantor then transfers many of his assets to the Revocable Trust during his lifetime. The Grantor can add or withdraw assets from and to his Revocable Trust at any time during his lifetime while he maintains capacity. When the Grantor dies, a Revocable Trust becomes irrevocable and the then serving trustee and trust beneficiaries may not alter any of the trust’s provisions. A Revocable Trust will avoid probate upon the Grantor’s death for all assets that have been transferred to the trust. Probate is avoided because Revocable Trust assets are not titled in the name of Grantor at the time of death and therefore the property is not part of a probate process. It is very important to fund a Revocable Trust as failure to properly fund the trust will provide little or no benefit to the Grantor. 

Whenever configuring an estate plan, it is important to meet and discuss with a qualified estate planning and probate attorney where you map out and plan what will happen to each of your assets upon your death to ensure that your estate planning goals are accomplished at the time of death. 

Real Estate

I CAN SEE CLEARLY NOW, IT’S NOT CLOUDY

When purchasing real property in Florida, people will often tell you to make sure that you get “clear title” or “good title” to the property. That sounds like good advice, but what does it really mean? First of all, title is the legal right to control and dispose of property. A deed is evidence of having title to real property, and the different types of deeds were discussed in one of our recent articles. Clear title and good title are different ways of referring to having marketable title to real property. A common definition of marketable title in Florida is title “which a reasonable, prudent person would accept in the ordinary course of business after being fully apprised of the facts and the applicable law.” Additionally, title is marketable if it is free of “clouds” or “defects” such as adverse rights, interests or liens. 

The Florida Uniform Title Standards are a reference for determining whether title is marketable. The preface to the Title Standards describes a title standard as “a voluntary agreement made in advance by members of [The Florida] Bar on the manner of treating a particular title problem when and if it arises.” The Title Standards have not been formally approved by any court or legislative body; however, they are well established principles used by real estate attorneys in Florida when examining title to real property. 

Obtaining title insurance when purchasing real property is the typical way of determining that title is marketable. A real estate attorney will examine recorded documents affecting title to the property, and then apply the Title Standards to any title problems that arise in the examination. Typically a buyer will have a contractual right to object if a seller’s title to real property is unmarketable. Assuming the seller’s title is marketable, the parties can proceed to closing and the buyer will receive an owner’s policy of title insurance. Title insurance is an indemnity against loss resulting from a title defect. If a defect is discovered after closing which renders title unmarketable, and the title insurance policy did not except or exclude the defect from coverage, then the title insurer will typically have to pay up to the policy limits to have the defect removed. 

One of our experienced attorneys can help you with your title questions, as well as closing your real estate transactions. 

Real Estate

Understanding Deeds

For first time homebuyers, or even experienced homebuyers, there are many different aspects of a real estate transaction that seem confusing. One of the most confusing areas can be understanding the different types of deeds. 

A deed is a legal document that transfers the title of real property from the seller to the buyer. In Florida, there are three main types of deeds: general warranty deeds, special warranty deeds and quitclaim deeds. The central differences between these deeds are the covenants (also known as agreements) and warranties that are conveyed by the grantor (the transferring party) to the grantee (the party receiving the deed). 

A general warranty deed gives the buyer the highest level of protection as it provides significant assurances conveyed by the grantor to the grantee. This deed promises that the seller owns the property, has the legal right to sell the property, and that the property is free of liens or encumbrances. In addition, the general warranty deed includes a promise that the new buyer’s ownership will not be impacted by a third-party claim against the property, the seller promises to defend the buyer’s title and will continue to do whatever may be reasonably necessary in the future to perfect title for the buyer. Because of the protections that come with a general warranty deed, this type of deed is the most commonly used deed in sales of residential properties. 

The second type of deed, the special warranty deed, doesn’t provide as much protection for the grantee as the general warranty deed mentioned above. In a special warranty deed, the grantor promises only that the grantor did not create title defects. The grantor is not responsible for and represents nothing about any claims or title defects that arose prior to grantor’s ownership of the property. This type of deed is more commonly used in sales of commercial property. 

Lastly, a quitclaim deed provides the least amount of protection for the grantee. This deed simply transfers any interest that the grantor may have in the property to the grantee and does not warrant the grantor has any interest in the property at all to convey. While the quitclaim deed may seem risky for the grantee, it is useful in some scenarios. It’s commonly used between family members to retitle property, such as adding or removing a family member from the title, in times of divorce or to clear up questions of title on a property with persons of unknown interest. 

The different types of deeds may seem complicated, but an experienced real estate attorney can make sure all of your closing documents are prepared properly and represent your best interests. 

Miranda K. Martinez is a 2019 graduate of Stetson University’s College of Law and recently joined Clark, Campbell, Lancaster & Munson, P.A., in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Real Estate

Implied Warranties When Selling Residential Real Property

When purchasing residential real property, purchasers and sellers should consider warranties that the seller will provide to the purchaser. Typically, warranties are expressly stated in the contract the purchaser and seller negotiate. However, new home builders who sell residential real property provide certain minimum warranties to the purchaser, regardless of whether or not those warranties are included in the contract. It is important to recognize these warranties exist and that new home builders may disclaim certain aspects of the warranties using the correct contract language. 

Warranties that are included in the sale of property or goods that are not included in the contract are known as implied warranties. There are several implied warranties that Florida courts applied to the sale of residential real property. These include: (1) the implied warranty to construct according to plans; (2) the implied warranty to construct in a workmanlike manner; and (3) the implied warranty of habitability. 

The implied warranty to construct according to plans concerns a warranty from the builder of a new home to the purchaser that the purchaser’s new home has been built according to the specifications outlined in the building plans. This is breached when the builder failed to construct the building according to those construction plans and the purchaser suffered damages as a result of that failure. 

The implied warranty construct in a workmanlike manner means that the home is constructed in a manner that is in accordance with the accepted norm of the industry. This warranty may be breached when the builder sold construction materials and workmanship, had a reason to know the particular purpose for the construction, the purchaser then relied upon the builder’s skill or judgment for the construction, and then the final product was defective and the purchaser suffered damages as a result. 

Finally, the implied warranty of habitability warrants that the newly constructed residence does not contain any latent defects that would make the residence unfit for living within. A breach of this warranty may occur when a purchaser takes possession of a new residence and a latent defect in the residence makes the premises uninhabitable. 

So, what if the seller of a home wants to preclude certain aspects of an implied warranty? Under Florida law, the seller and purchaser may exclude certain and specific items from an implied warranty through a disclaimer with clear and unambiguous language that clearly reflects both parties’ expectations as to what items are not warranted. This means that general or broad disclaimers of implied warranties are not effective to disclaim specific items covered in an implied warranty. 

Most of the law regarding implied warranties is not contained in the Florida Statutes, but rather is case law created by judges in different judicial circuits throughout the state of Florida, making the rulings on implied warranties inconsistent throughout the state. As always, when preparing contracts involving real property, it is important to consult with an attorney about important issues such as implied warranties. 

What to Consider When Appointing a Fiduciary?

A well-crafted estate plan will require a person to appoint individuals or financial institutions to represent them in the event they: need assistance with their affairs during their lifetime, lose capacity, or after death. Being a fiduciary is a very time intensive and intellectually challenging task to put upon an individual. The common fiduciary positions that your estate planning lawyer may ask you to name are as follows:

  • Personal Representative: appointed by a Court to administer your estate when you die;
  • Agent-In-Fact (under a durable power of attorney): manages your financial affairs during your lifetime;
  • Health Care Surrogate: makes health care decisions for you during your lifetime;
  • Trustee of a trust document: administers the terms of a trust that you have created;
  • Guardian: makes health care and financial decisions for you in the event that less restrictive alternatives are ever deemed insufficient by a Court during your lifetime; and
  • Guardian for your minor children: makes decisions for your children in the event you pass away or lose legal capacity before the children become legal adults.

The individuals or financial institutions that you choose to serve in these various fiduciary roles will have substantial responsibilities that will require them to make decisions  or act actions on your behalf such as follows:  apply for government benefits; make health care decisions; manage and invest your assets and income for your benefit (or others as you have chosen); decide where you will live; work with attorneys,  financial advisors, and accountants; and distribute your assets upon your passing.

Often times a person will name their spouse or their oldest child as their fiduciary because they assume that its typical for estate planning, but some more thought should go into these decisions and you should consider the following questions:

  • Does this person have the education, experience, and skillset to manage my financial affairs?
  • Is this person too busy to take the time to serve as a fiduciary for me?
  • Can this person make a difficult decision regarding my health care?
  • Would this person make the same health care decisions that I would make for myself?
  • How close does this person live to me?
  • How old is the person I am appointing and will they be around to serve as my fiduciary in the future?
  • Will appointing this person create a divide amongst other family members?
  • Does the size of my assets and income require a professional such as my accountant or a financial institution to manage?

The above are just a few items to consider about when choosing fiduciaries to name in your estate planning documents.  However, only you know who the right person(a) or financial institutions are for you in these fiduciary roles. I recommend spending a little time considering which person(s) or financial institutions are right for you prior to meeting with your estate planning attorney.

Real Estate

Borrowing Money Secured by Real Estate

When borrowing money to acquire or refinance real property in Florida, the lender will prepare an entire loan package for you to sign at closing. The two main documents in the loan package are the promissory note and the mortgage. The promissory note creates the primary contractual obligation for you to repay the loan to the lender. Generally, the note will include things like the amount that you are borrowing, the term of the note, the interest rate being charged and the amount of your payments. You will want to look carefully at other provisions of the note that could impact repayment, such as late charges, default interest rate and prepayment provisions.

The mortgage secures repayment of the promissory note. It will be recorded in the public records of the county where your real property is located. The mortgage will typically have representations and warranties that you make to the lender regarding you and your ownership of the property. Additionally, the mortgage will have covenants with which you will be required to comply as long as your loan is outstanding. Typical mortgage covenants include things like maintaining the property, keeping the property insured and paying the real estate taxes. According to Florida law, a mortgage only grants a consensual lien on the real property in favor of your lender and is not deemed to be a conveyance of the legal title or the right of possession; however, the mortgage will also contain default provisions and what the lender’s remedies are in the event of a default. A typical remedy is judicial foreclosure of the lien, which could result in the lender ultimately owning your property if you do not repay the loan.

Promissory notes and mortgages are subject to documentary stamp taxes in Florida. These documents are taxed at a rate of 35 cents per $100, or any fraction thereof, of the amount of the indebtedness indicated in the document. Mortgages are typically also subject to a nonrecurring intangible tax imposed at the rate of 2 mills (.002) on each dollar secured by the mortgage. Note that some mortgages, such as those in favor of a credit union, are exempt from the intangible tax.

One of our experienced attorneys can help you with your loan questions, as well as closing your real estate transactions.