REAL Exclusive Magazine William Henry PhD - Perspectives - Architect's REAL Viewpoint

Does Title Insurance Really Protect a Property Owner from Zoning Issues?

By William Henry, PhD

Title Insurance is a policy to protect and/or indemnify against loss or damage resulting from defects in the title and deed to the property.

What does Title insurance cover? The basic title insurance policy that is not “overly endorsed” includes the following: 1) Representation as to the actual owners of the property, 2) Representation that the property is free of encumbrances, i.e. other mortgage liens, mechanics liens, and potential claims that have not been recorded, and 3) Representation that there is access to the property that will allow the current use to continue in operation.

Potential purchasers of property in Florida are often mistakenly led to believe that the title insurance purchased warrants that the zoning and land use entitlements in place conform to the existing or intended use. For instance, unbeknownst to the seller and/or his agent, a property zoned multi-family residential may be in the process of undergoing a government initiated land use change. Local planning officials could be planning a change which would affect the entitlements to build additional improvements or to rebuild after a catastrophic fire or storm. These land use ‘updates’ to an approved area comprehensive land use plan are routinely undertaken by local government land planning agencies to change the approved comprehensive long range plan. This was enacted by the State legislature some years ago to prevent urban sprawl and corrupt local officials from giving in to special real estate investment interests. More specifically it was enacted to discourage development beyond the ‘urban service area’. In other words government is loathing paying for sewer and roads into the hinterlands if redevelopment can be given incentives closer to the urban core.

States without the sensitive ecology of Florida with extensive coasts and wetlands are less likely to experience this kind of government intervention. Therefore they pose less risk that the zoning code can be modified and limit some types of building development. According to some title insurance representatives, there isn’t a week that goes by that a financial institution or potential real estate purchaser doesn’t request that a title insurance policy be underwritten in Florida to provide coverage for zoning conformance.

When they are told that the title insurance provider cannot, they often request that an attorney provide an opinion letter as a substitute that the bank and/or investors can look to. Attorneys specializing in providing these letters of conformance are reluctant to do so without charging large fees to offset potential liabilities and charges for professional liability insurance.

Thus ‘overly endorsed’ title insurance policies in Florida may include coverage for other potential encumbrances such as, mezzanine loan securitization. This extra endorsement insures that the proceeds from a sale (equity) inure to the benefit of a mezzanine lender. This is tantamount to a second mortgage whose lien is never recovered on the property—but again they will not include zoning conformance insurance.

We as planners and land use specialists have been asked on many occasions to write informed professional opinions concerning land use and zoning conformance. These opinions are based upon a number of factors which include not only the current designated land use and designated zoning categories in question, but also covenants and restrictions and the potential for waivers from the approved land use. In short, government staff now has inordinate authority to recommend that waivers be granted to an applicant in order to facilitate desired projects.

Desired development in today’s government oriented mass transit environment could include density bonuses, setback waivers, parking allowances, and other measures to grant ‘relief’ to potential developers. Opposed to this are often neighborhood interests and other stakeholders who believe that these waivers constitute a threat to neighborhood “cohesiveness”. The zoning battles that ensue in front of elected official governing municipal and county boards are often costly drawn out affairs where both parties really lose.

RGA has specialized in conducting research into specific properties that are being transferred. Opinion letters include the above and also some projections of the likelihood of political and neighborhood opposition. As a former unelected public official for over 20 years in Hillsborough County as well as the former Chairman of the Hillsborough County/ City of Tampa Planning Commission, I have been asked to opine on matters that include much of the above. Here at RGA, we specialize in zoning and land use due diligence.

Please contact us at www.rga-design.com or 813-226-2220 if you are interested in consulting what your property zoning and land use designation is and/or could become in the not too distant future.

^[1]William Henry PhD is the Principal in Charge of RGA-Design, LLC a full service architectural and interior design firm that has served as the architect of record for over 1,000 projects across the State of Florida (Registration number AA0003523). He has lectured and written widely on the above topic. His most recent publication is ‘Return of the Master Builder’ available on Amazon Kindle e Books. Henry’s contact information is whenry@rga-design.com ^[2]; (813-226-2220 Ext 204) or visit the company web site at www.rga-design .com ^[3] or www.buildingdoctorfl.com ^[4].

^[6]