Implied and Constructive Notice: Title Search Fallibility and the Rigidity of the Constructive Notice Doctrine

When you buy or have a lien on a property, it’s important to check if there are any mortgages, liens, or restrictions on it. This is done through a title search, which can be done by a lawyer or a title search company. Sometimes, it’s hard to find all the necessary documents for the search, and this can cause problems. If a property is not described properly in a mortgage, it can create confusion about whether the mortgage applies to the property. In Florida, the way a document is referenced or included in a mortgage can affect how it is treated under the law. This can lead to problems with noticing issues. During the process of buying real estate in Florida, it’s important to review the history of the property’s title to make sure there are no issues with previous transfers of ownership or mortgages. Florida has laws that require certain documents, like deeds and mortgages, to be recorded in order to be valid. Every state has a recording statute that determines how these documents are prioritized, and Florida is a “notice” state. This means that a person buying property without knowing about a previous mortgage can still prevail against the previous owner. Notice can come in the form of actual, implied, or constructive knowledge. Constructive notice is when someone should have known about a previous mortgage because it was recorded properly, but if a mortgage doesn’t have enough information about the property, it may not count as constructive notice. Simply put, a legal description in a mortgage can still be effective even if it contains mistakes. The mortgage may also reference other documents, providing notice of their contents. However, the reference must be specific and clear, and the person reading the mortgage must be prompted to look at the referenced documents. In a case involving Regions Bank, a legal dispute arose due to irregularities in a property’s legal description in a mortgage. The court had to determine if the reference to another property in the mortgage created a third mortgage, causing confusion and legal issues. The mortgage for the Bayfront Gardens property had a lot of mistakes in describing the property. The person who wrote the mortgage forgot to include the legal description of the property and didn’t mention Exhibit “A” which had more details about the property. Because of these mistakes, the mortgage was not filed correctly in the clerk’s office and didn’t show up in a title search for the owners. The Delucas bought a property from the Fulchinos and got a loan to do it. But there was a mistake in the loan paperwork that didn’t show there was another mortgage on the property. When Mr. Fulchino passed away and the Fulchinos couldn’t pay their mortgage, the bank wanted to take the property from the Delucas. The court said the Delucas should have known about the other mortgage, even though they didn’t see it in their title search. So, they couldn’t use that as an excuse. Regions Bank shows a problem with the rules about what buyers and lenders should know when they’re getting a property. The court’s decision puts a lot of burden on buyers to search through all the records about a property before they buy it. This is especially tough in a place like Florida, where there are a lot of foreclosed properties for sale. If this rule stays the same, it could make it really hard for people to buy and sell property fairly. In Florida, there’s a problem with how the courts handle constructive notice with mortgages. They need to use a more fair approach, like they do with implied notice. This would help protect buyers and lenders who didn’t know about any problems with the property they bought or loaned money for. The current system can create unfair situations for them. The process of checking the property’s history before buying or foreclosing is important, but sometimes it doesn’t catch all the problems. A recent case with Regions Bank shows how things can go wrong. Using a fairer approach to constructive notice, like they do with implied notice, would make things better for everyone. This is a legal case where a bank sued a homeowner for not paying their mortgage. The court ruled that the bank did not give the homeowner proper notice before the lawsuit, so the bank lost the case. The court said that the homeowner must be given notice before a lawsuit is filed, and the bank didn’t do that. The court also said that other people who have a stake in the lawsuit also need to be notified. Foreclosure rates in Orlando went down in July, according to Megan Anderson from CoreLogic. Morgan L. Weinstein and J. Anthony Van Ness are lawyers at a firm that deals with mortgage banking. They both got their law degrees from different universities. This information is from the Real Property, Probate and Trust Section.

Source: https://www.floridabar.org/the-florida-bar-journal/implied-and-constructive-notice-title-search-fallibility-and-the-rigidity-of-the-constructive-notice-doctrine/