Who do I sue first?

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Who do I sue first?

Nat C.
Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes

I purchased a property in Dade County in 2013. The property was on the same parcel as another condominium building.

The purchase contract stated this in the additional terms-

“Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”

When I recently went to sell the building, the buyers attorney informed me the land was never separated from the condominium with the city. Furthermore the city will not allow the separation as it would not meet their size and setback requirements. The buyer therefor backed out of the sale.

After extensive investigation, it was discovered that the sellers attorney executed the separation of the property with the county but not with the city.

The city will not issue any permits for work on the property unless it rejoins the condominium association.

Rejoining the condominium could trigger them to ask for backpay of 7 years HOA dues. It will also reduce the value of the building as it will be tied to a HOA and have ongoing fees payable.

I am trying to decide the best course of action forward.

1. Make a claim with the title insurance company because I feel they never should have issued title insurance on the property to begin with. I am unsure if I can make a valid claim and would value any feedback here.

2. Request the seller and his attorney hire a zoning attorney to battle with the city and obtain a variance to allow the plot to be legalised.

3. Sue the seller alleging they had an intention of fraud. I would argue they were aware the city would not allow the separation due to the size and setbacks, hence they sold the property and said the severance would be done after the sale. I am not sure how much I would try to claim in damages though?

I purchased the building for 80k. Funds spent over the years adds up to 40k.

The recent contract I had to sell the building was for 150k.

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Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
6y

The first thing you should do is submit a claim to the title insurance underwriter, not the agent that sold you the policy.  Assuming its a Florida Modified 2006 form ALTA policy the place to submit a claim should be found under Conditions 18 of the policy.  There may also be an online claims submission web site, try searching the underwriter's name and "claims" to see if you can find it.  I would also pull out a copy of your title policy and look at the legal description under Schedule A 4 and see how the property is described.  If it says a part of the condominium described in the declaration of condominium for XYZ Condominium as recorded in Official Record Book 1234, Page 5678, Public Records of Miami-Dade County I think there's a good chance there will also be an exception for the Dec of Condo on Schedule B and the underwriter will deny coverage because they insured the property as part of the condo.  If those two things are not there, it may be covered.

This sounds like it wasn't a run of the mill sale.  Were you represented by an attorney at closing?  If so I would immediately contact him/her.

If the release of the property was a condition of closing I would expect the settlement agent, who probably issued the policy, would have addressed the requirement so I would also contact them and ask how.  Along those lines, look at the title commitment that you should have received in advance of the closing and see if there is a Schedule B-1 requirement for the release from the Dec.  If its not there I suspect the policy will describe the property as above.

If it all goes south you're going to need a good real estate attorney to fix this.  I don't know what you paid but the repair probably won't be cheap.  If you need a referral I've retained an attorney in South Florida to fix many complex title related problems I'd be happy to refer you to.  Good luck. 

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  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    @Wayne Brooks 

    Tom Gimer I can't tag you as we are not connected by I hope you can weigh in

    1Reply
  • Account Closed
    Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes
    6y
    Originally posted by @Nat C.:

    I purchased a property in Dade County in 2013. The property was on the same parcel as another condominium building.

    The purchase contract stated this in the additional terms-

    “Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”

    When I recently went to sell the building, the buyers attorney informed me the land was never separated from the condominium with the city. Furthermore the city will not allow the separation as it would not meet their size and setback requirements. The buyer therefor backed out of the sale.

    After extensive investigation, it was discovered that the sellers attorney executed the separation of the property with the county but not with the city.

    The city will not issue any permits for work on the property unless it rejoins the condominium association.

    Rejoining the condominium could trigger them to ask for backpay of 7 years HOA dues. It will also reduce the value of the building as it will be tied to a HOA and have ongoing fees payable.

    I am trying to decide the best course of action forward.

    1. Make a claim with the title insurance company because I feel they never should have issued title insurance on the property to begin with. I am unsure if I can make a valid claim and would value any feedback here.

    2. Request the seller and his attorney hire a zoning attorney to battle with the city and obtain a variance to allow the plot to be legalised.

    3. Sue the seller alleging they had an intention of fraud. I would argue they were aware the city would not allow the separation due to the size and setbacks, hence they sold the property and said the severance would be done after the sale. I am not sure how much I would try to claim in damages though?

    I purchased the building for 80k. Funds spent over the years adds up to 40k.

    The recent contract I had to sell the building was for 150k.

     You may have a statute of limitations issue. I would take out the title insurance, contact the title company and let them handle the front end. If they say too much time has passed (it may be limited to 3 years or 6 years depending on the statute) point out to them that the code probably says something like SOL begins "after discovery" and you just discovered it. If they refuse to go any further you contact a real estate attorney in the county that the property exists and have a consult.

    You will need to take any written agreements you have, the title insurance paperwork, the letter from the county, the letter from the city, the work that the previous attorney did and the closing settlement. In this case I would probably get two different attorneys opinions. You would ask if they think you have a claim. You want to ask what their legal theory is regarding how they would approach the claim. You want to know how much they charge per hour, You ask how long it would take to litigate and what the projected cost would be to go to trial. You have to know "worst case scenario" to help figure out your options. And then you want to know what your chances of winning the case are, ask if he thought the other side would appeal, does he think they would be willing to settle, and does the winning side collect attorney fees.

    That is the short answer.

    9Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    The first thing you should do is submit a claim to the title insurance underwriter, not the agent that sold you the policy.  Assuming its a Florida Modified 2006 form ALTA policy the place to submit a claim should be found under Conditions 18 of the policy.  There may also be an online claims submission web site, try searching the underwriter's name and "claims" to see if you can find it.  I would also pull out a copy of your title policy and look at the legal description under Schedule A 4 and see how the property is described.  If it says a part of the condominium described in the declaration of condominium for XYZ Condominium as recorded in Official Record Book 1234, Page 5678, Public Records of Miami-Dade County I think there's a good chance there will also be an exception for the Dec of Condo on Schedule B and the underwriter will deny coverage because they insured the property as part of the condo.  If those two things are not there, it may be covered.

    This sounds like it wasn't a run of the mill sale.  Were you represented by an attorney at closing?  If so I would immediately contact him/her.

    If the release of the property was a condition of closing I would expect the settlement agent, who probably issued the policy, would have addressed the requirement so I would also contact them and ask how.  Along those lines, look at the title commitment that you should have received in advance of the closing and see if there is a Schedule B-1 requirement for the release from the Dec.  If its not there I suspect the policy will describe the property as above.

    If it all goes south you're going to need a good real estate attorney to fix this.  I don't know what you paid but the repair probably won't be cheap.  If you need a referral I've retained an attorney in South Florida to fix many complex title related problems I'd be happy to refer you to.  Good luck. 

    9Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y

    “Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”

    The agreement was to sever post-settlement so I assume you'll find the title policy insures as part of the condo and subject to the declaration etc. and as @Peter Walther suggested, the title claim would be denied on that basis.

    Without seeing the original agreement nobody can give a reliable answer but based upon the info provided that would seem to leave as defendants (1) the seller and (2) your real estate agent or attorney (if any)... the latter for not researching this and/or leaving severance open as a matter that could actually be handled post-settlement.

    Regarding who you sue first... the answer is everybody, or you may lose the right to sue someone you should have later.

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    Good catch Tom, I failed to note the requirement for the release to be performed post closing, there may not be coverage under the title policy.  I would suggest Nat start contacting people as above immediately.  I have experience trying to remove property from a Dec and it's not easy, particularly if any of the units have been sold to third parties because you're going to need their agreement.  If I bought a unit with the expectation the rest of the property would be developed as part of the project I might be reluctant to agree to it being improved with something I might not like, say a convenience store or strip center.

    2Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    Peter, your knowledge and expertise is simply amazing. If I had even half of your proficiency, I wouldn't be in this mess in the first place. 

    I have checked the policy and both items you mentioned in Schedule A and B reference the property as part of the condominium. I was already doubtful I had any claim under the title insurance policy and this has just cemented that. 

    It was not a run of the mill sale. I absolutely was represented by an attorney who charged me a huge fee for her services. I was already vexed by her services prior to the closing.

    She failed to mention to me there was a $5000 bond I had to pay to the city as a guarantee I would remodel the property within 90 days of purchase. As I was overseas at the time of the closing and wasn't going back to the US for months, I knew there was no way I could remodel the property within that time frame. When she told me about the $5000 bond, I immediately said I needed to withdraw from the sale. She told me that it was too late to withdraw from the sale, without losing my 10k EMD. As someone who was meant to be representing me and my interests, I always strongly felt she was on the seller's side. She was referred to me by the real estate agent. The real estate agent was a whole other can of worms. I wouldn't even bother trying to pursue the realtor, as she probably doesn't have a dollar to her name.

    I contacted the attorney who represented me immediately after all of these issues came to light. Her response was that it was the seller's attorney's responsibility to handle the separation post-closing, so it had nothing to do with her. I also just saw that she (my attorney) was the issuing agent of the title policy. 

    Do you think I have any probable suit with her? To be honest, it would make me feel a sense of justice to go after her, considering her conduct from the start.

    1Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Tom Gimer:

    “Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”

    Thank you for your valuable insight, Tom. You are correct, it can be deduced there is no claim to be made with the title insurance company. 

    I emailed the sellers attorney with the following-

    "It has recently come to my attention that the terms of the contract that the seller signed, have not been fulfilled. The contract states-“Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”
    As of May 2020, the severance has not been executed with the city. This has rendered the property unmarketable and unsaleable.
    I am writing to formally request that your client honor the terms of the contract and undertake the necessary action to fulfill the contract terms.
    If the property is not able to be separated from the condominium, I will only be able to sell the building at a fraction of the price. I will then be seeking damages from your client for the difference in price."

    His response was that-

    1. He executed the termination with the county.

    2. It was my responsibility to do due diligence with the city prior to the purchase.

    I agree with his statements however I believe there is still a breach of contract as he did not and could not complete the severance with the city.

    Does anyone else find it suspicious that this was not handled prior to closing? In every other real estate transaction, I can recall in my entire life, the closing is stalled until any outstanding issues are finalized. Hugely important matters relating to the zoning of the land are never left to post-closing.

    When you say to sue everyone, is that one lawsuit where you name everyone who could possibly be responsible?

    I have little knowledge and experience with lawsuits but I think that’s the general approach, as opposed to separate lawsuits. And would I be correct in thinking the amount I would sue for is the difference in the sale price? E.g, The buyer I had lined up will only pay 100K, now that the property has all of these problems with the city. The original contract price was 150k, so I would, therefore, sell it off at 100k and initiate a lawsuit for 50k?

    1Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    6y

    Two questions:

    1. How is the building being used now? ie, rental?

    2. What happens if you DON'T sell it? ie, can you generate any revenue with the property as a rental or whatever?

    You said you have about a $50k spread between what the building is worth and what it would be worth if it was legally separated. $50k is a lot of money but with that said, by the time this gets litigated, unless you recover legal fees, I think you're in for a huge nightmare and may want to consider taking the loss and being done with it.

    0Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    Nat you're starting to move from title related issues to possible attorney client relationship issues.  If the policy issuing attorney was in fact your attorney, rather than a closing agent who happened to be an attorney, prior to signing the contract, I'm not sure why she believes it was not her responsibility to one ensure the requirement to remove the property from the condo was set up to be completed pre closing rather than post closing or to at least make sure you were aware of the possible downside to signing the contract the way it was.  In addition, I don't understand why she believes it's not her responsibility to follow up with the Seller to make sure the requirement is complied with.  She might charge you for doing so but to decline to do so is mystifying.

    You may need to retain new counsel to assert your claims against anyone who might have liability but as John wrote, the cost may out weigh the possible benefit.  As an aside I might still file a claim with the title underwriter, the worst they can do is deny coverage and perhaps they will look into their agent's actions.

    2Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    You can also consider filing a grievance against your attorney with the Florida Bar Association.

    https://www.floridabar.org/pub...

    2Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    1. The building is vacant and is almost a shell, requiring build-out. I did some work there but it requires substantially more work to be habitable.

    2. As above, it can generate no revenue in its current state. To build it out requires permits. The city won't issue any permits at present because of its zoning conundrum. 

    Regarding the legal costs, I fully concur that it's a financial risk. The costs of litigation render the justice system, most unjust. Many a time have I been wronged in real estate matters but I have decided to just let the matter go. 

    0Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    Peter, I am glad you are mystified, because I am mystified too! When I first reached out to her about these issues, she said she had a baby now and didn't have time to help with any matters. I recently emailed her again with further questions, after everyone here (Peter, Wayne, Tom) gave me so much information and insight. 

    My Question to her-

    "Why was this extremely important issue put in the contract as a post-closing matter? Why was closing not simply delayed until the matter had been dealt with? The seller would have then learned that it couldn’t be separated and I never would have bought the property."

    Her Answer-

    • "I was not present at the outset of negotiations. The contract, with no contingencies, had already been entered into when I started working on the transaction. I do not know why that was included as a post-closing condition for the seller." 
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y

    wow this is a tough one..  like you said you could be throwing good money after bad.

    might be best to let it go for tax's and see if anyone buys it and collect the overage ?

    and walk away..

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  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Peter Walther:

    You can also consider filing a grievance against your attorney with the Florida Bar Association.

    https://www.floridabar.org/pub...

    Thanks a lot for the link, Peter. I will absolutely follow through with this

    0Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    I emailed a gentleman who did some legal work for me in the past. He did a law degree in the UK and he has a 'legal services' company in Florida. He is not a licensed attorney. He offered to take on the lawsuit for a small fee plus 25% of any monies awarded. Using him would certainly mitigate the financial risk factor.

    I have only briefly explained the issue to him but I am unsure about his response. I don't know much about Quiet Title but I didn't think it could be used in this situation. Can anyone shed further light?

    "I think a lawsuit arguing breach of contract, and negligence on the part of the 1st attorney, Ms. ****, would be the best course of action. In the complaint a request to the Court could also be made to quiet title to the property in your favor. I would be more than willing to draft the lawsuit for you and file it in the Dade County Courts".

    0Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    You are smart Jay. @Wayne Brooks offered me the same idea, which I thought was highly creative. There's also some liens on the property now, so Wayne suggested letting it go for unpaid taxes to wipe out the liens. The only risk is if it sells for 10k or something. I also don't want to have a foreclosure on my record. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Nat C.:

    You are smart Jay. @Wayne Brooks offered me the same idea, which I thought was highly creative. There's also some liens on the property now, so Wayne suggested letting it go for unpaid taxes to wipe out the liens. The only risk is if it sells for 10k or something. I also don't want to have a foreclosure on my record. 

    Tax foreclosure is not reported to any credit agency..  Wayne knows FLA real estate .. the other thing to do is sell it on sweat equity to someone who will put their own cash into fixing it up and keeping long term.. knowing it cant really be sold.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Nat C.:

    You are smart Jay. @Wayne Brooks offered me the same idea, which I thought was highly creative. There's also some liens on the property now, so Wayne suggested letting it go for unpaid taxes to wipe out the liens. The only risk is if it sells for 10k or something. I also don't want to have a foreclosure on my record. 

    Also Nat if your looking for new digs in Charleston go check out my new construction at 144 and 146 Bull st.. cool houses be perfect for you :)

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  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Jay Hinrichs:

    That is amazing the tax foreclosure doesn't affect anything.

    Forgive me, I don't understand your statement about selling it to someone on sweat equity. The major problem is that the city won't give any permits on it and don't recognize it as its own parcel. 

    I did just discover the chunk of land behind the property is owned by a lady who nearly lost it in foreclosure in recent years. I am going to reach out to her to ask if she will sell off some of the land to me. If she did, that would increase the lot size and solve the problem.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Nat C.:
    Originally posted by @Jay Hinrichs:

    That is amazing the tax foreclosure doesn't affect anything.

    Forgive me, I don't understand your statement about selling it to someone on sweat equity. The major problem is that the city won't give any permits on it and don't recognize it as its own parcel. 

    I did just discover the chunk of land behind the property is owned by a lady who nearly lost it in foreclosure in recent years. I am going to reach out to her to ask if she will sell off some of the land to me. If she did, that would increase the lot size and solve the problem.

    OK sorry I missed the part about no permits.. shoot..  

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  • Clint ShelleyPro Member
    Surveyor · Dothan, AL · Member since 2014 · 425 posts · 391 votes
    6y

    If the county allowed it to be severed, what is the city's hangup. New regs or just one of those municipalities that are hard to deal with? I would definitely get new outside counsel. I think you're best chance is to try to squeeze the city into a variance or subdivision, etc. Although it'll be a pain it will likely be the cheapest route to go. See if you can get a joint meeting with the city and county representative. Have your new attorney meet with their attorneys to figure out why one would allow and the other not. Try to get this done in lieu of a lawsuit that will bring everyone in. The threat of a big suit will hopefully help you get to where you want to be. Play the victim, and see if they will be favorable toward you. If that doesn't work your best shot at relief would be against the seller, as they would have sold you an illegal lot, though they could argue the contrary since the county approved. This is messy and who knows what will happen. Keep is posted and good luck.

    Clint

    3Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    Nat, this is a very complex issue.  First, I would hesitate to rely on a complaint drafted by a UK attorney for you to file yourself (pro se).  I believe if he's recommending a quiet title suit he doesn't understand the problem.

    Second, I'm unclear what you purchased.  Generally condo real property is in one of three categories, units, common elements and limited common elements.  Generally only units are sold to purchasers with a pro rata interest in the common elements and a exclusive right to use the limited common elements servicing that unit coming with it.  To sever any of those three from the condominium requires the agreement of anyone have an interest in the condo including the developer if (s)he continues to own units, the condo association, anyone owning a unit in the condo and any lender having a mortgage on any of the three including units because the lender also has a lien on the unit owners undivided interest in the common elements.  What did you buy?

    Third, to remove real property from a condo requires strict compliance with Florida laws governing condominiums.  You need an attorney with condominium experience if you want to fix this problem.  If everyone with an interest is in agreement with severing the property, perhaps they would also agree to allow you to purchase some additional land adjacent to what you bought sufficient to meet the city's requirement.

    Fourth, is your former attorney correct when she writes the initial contract did not have any contingencies?  If so had did the contingency get added?

    Last, I believe this matter is way to complicated for you to rely on any advice you receive on this board.  If you want to salvage anything other than a lesson well learned you need to sit down with a good attorney and figure out what your options are.

    5Reply
  • Brian Van Pelt
    Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
    6y

    @Nat C. Before you go through the long drawn out and costly process of trying to assign blame, look at your Original Post.

    “Seller, as a condition subsequent to closing, shall remove and sever the subject properties from the condominium regime.”

    The person that will ultimately end up burdened with the cost of this will the "Seller".

    You need to:
    . Contact a Real Estate Atty
    . Draft a letter giving them a set amount of time to resolve the issue, then sit back and let them spend money resolving the issue. After the time expires then file your lawsuit based on the advice you you new Real Estate Attny.

    I am curious though why you did not escrow a large amount from Sellers proceeds from the Sale of the property ? This is standard practice when there are conditions that need to be meet post sale. This encourages the Seller to complete this as soon as possible. 



    2Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    6y

    I don't have a solution to the issue. I do have a question though. What was going on with the property for the 7 years you've owned it? ie, why didn't this situation surface previously?

    0Reply
  • Nat C.
    OP
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    @John Teachout

    I was out of the country for 80% of the time I owned the building. The issue only came to light when I recently went to sell the building.

    0Reply
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