The Florida Association of Realtors has perpetuated the widespread use of the FAR/BAR contract. The title insurance industry and the Florida Bar should have no complaints. The language found in the conveyance section of the FAR/BAR contract states as follows:

"Seller shall convey marketable title to the Real Property by statutory warranty... deed" See FAR/BAR Contract Revised 09/07; FAR/BAR ASIS-2x Rev. 2/08.

The FAR/BAR contract, however, offers no alternative to using a general warranty deed. The FAR/BAR contract is devoid of language which gives parties involved in a real estate transaction the ability to employ the use of a special warranty deed without making specific changes to the printed version of the contract. The use of a general warranty deed could subject a seller to liability beyond the policy limits of any previously issued owner's policy (i.e., continuity of coverage after conveyance) insuring that seller in the event of a lawful title claim against a subsequent purchaser. A special warranty deed, however, warrants the title only with respect to acts of the grantor and the interests of anyone claiming by, through, or under him.

The FAR/BAR contract in its present form would need modification in order to employ the use of a special warranty deed. The only choice the parties really have in the absence of modifying the contract is for the seller to convey by statutory warranty deed. This makes it virtually impossible for buyers and sellers to effectively negotiate with respect to the issue of which type of deed the seller will be using to convey title to the real property. The Florida Association of Realtors has taken the position that any realtor who influences "choice of deed used" in connection with representing buyers and sellers in a real estate transaction would be engaging in the unlicensed practice of law. This might explain the reluctant behavior on the part of the Florida Association of Realtors in not allowing complete choice with respect to alternative methods of conveyance. What seems confusing, however, is that FAR would rather steer buyers and sellers to the use of a given instrument to convey title rather than allow market forces to properly address the issue of type of deed used in conveying title to real property. Does this steering constitute the unlicensed practice of law? Is this an attempt by the FAR/BAR committee to restrict negotiations between buyers and sellers of real property regarding the use of a certain instrument of conveyance?

Real property sellers using a FAR/BAR contract might be concerned with the following:

the use of a general warranty deed could subject a seller to liability beyond the policy limits of any previously issued owner's policy (i.e., continuity of coverage after conveyance) insuring that seller in the event of a lawful title claim against a subsequent purchaser in connection with acts which predate the seller's ownership.

the widespread use of the general warranty deed benefits the title insurance industry in that any title insurance underwriter who issues an owner's policy in connection with a transaction that employed the use of a FAR/BAR contract would hold the seller accountable for the defenses and warranties made in connection with the transfer of title. The title insurance underwriter has a duty to indemnify and defend the insured in the event of a lawful claim. Thus, a seller could, in fact, be liable as a result of unmarketable title in connection with acts which predate the seller's ownership.

the widespread use of the general warranty deed benefits Florida Bar members (the legal community) in that a closing attorney who represents a buyer and issues an owner’s policy could easily argue in favor of buyer in a lawsuit filed against seller in the event of a lawful title claim made against buyer in connection with acts which predate the seller's ownership.

A Florida statutory warranty deed fully warrants the title to the real property and explicitly states that the seller will defend against the lawful claims of all persons whomsoever. See Sec. 689.02, Fla. Stat.

Pursuant to Florida law, a conveyance executed substantially in the foregoing form shall be held to be a warranty deed with full common-law covenants, and shall just as effectually bind the grantor, and the grantor's heirs, as if said covenants were specifically set out therein. And this form of conveyance when signed by a married woman shall be held to convey whatever interest in the property conveyed which she may possess. Sec 689.03, Fla. Stat.

Certain provisions to consider:

"The coverage of this policy shall continue in force as of Date of Policy in favor of an insured only so long as the insured retains an estate or interest" ... "Or only so long as the insured shall have liability by reason of conveyance of warranty made by the insured in any transfer or conveyance of the estate or interest." ALTA Owner's Policy (10-17-92)

"Seller shall convey marketable title to the Real Property by statutory warranty... deed" See FAR/BAR Contract Revised 09/07; FAR/BAR ASIS-2x Rev. 2/08.

"And the said party of the first part does hereby fully warrant the title to said land, and will defend the same against the lawful claims of all persons whomsoever." See Sec.689.02, Fla. Stat. Form of Warranty Deed Prescribed

Hypothetical

You purchase $200,000.00 of owner's title insurance coverage. 5 years later, you sell your home for $600,000.00. You convey title using a Florida statutory warranty deed as defined in Sec.689.02, Fla. Stat. As a result, your exposure with respect to liability in the event of unmarketable title could exceed policy limits of your previously issued owner's policy. The continuous coverage provided in your original owner's policy of $200,000.00 is by virtue of conveyance of warranty made by you, the insured, in your transfer or conveyance of your estate or interest. However, If you chose to convey title by special warranty deed, given the option, the continuous coverage provided in the ALTA owner's policy (ALTA Owner's Policy (10-17-92)) would not apply and you would not be subject to liability predicated on acts prior to your ownership in the absence of fraud.

Nancy Norelli is a Florida lawyer and Jack Laufer is a Florida title agent and real-estate broker.

Disclaimer: Information on this Web site should in no way be construed as legal advice. If you need legal advice, you may wish to consult an attorney.