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<div><FONT face="Arial, Helvetica, sans-serif">Reese</FONT></div>
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<div><FONT face="Arial, Helvetica, sans-serif">This proposal will be opposed in the 2012 legislature.</FONT></div>
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<div>Barry Kalmanson<br>
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<div style="FONT-FAMILY: arial,helvetica; COLOR: black; FONT-SIZE: 10pt">-----Original Message-----<br>
From: Reese J. Henderson, Jr. <Reese.Henderson@atritt.com><br>
To: constructionlaw <constructionlaw@lists.flabarrpptl.org><br>
Sent: Mon, Sep 12, 2011 10:44 am<br>
Subject: [RPPTL-constructionlaw] Legislative Subcommittee Report - amendment to 713.10 proposal<br>
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<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">Folks,</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">My report is that the Executive Council approved the proposed glitch fix for 713.10 at the August meeting at The Breakers. A copy of that bill is attached. During the discussions leading up to the adoption of this bill, a point was raised by the title insurance committee that the procedure for demanding a verified copy of the lien prohibition in the lease could have the effect of allowing construction liens to “pop up” after the closing of a sale to a bona fide purchaser for value without notice of the potential lien due solely to the owner’s failure to respond timely to such a demand. Specifically, </SPAN><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">upon the sale or refinancing of any property on which there is one or more outstanding notices of commencement for tenant improvements, and for which there is a blanket notice recorded, the title companies are refusing to rely upon the blanket notice to remove any exception from the title commitment for these notices of commencement. The reason is that there is no record evidence as to whether a demand for a verified copy of the lien prohibiting language (“DVC”) was served or whether the owner responded timely, with the result that liens literally could “pop up” that otherwise would be invalid solely due to owner non-compliance with the DVC. The result has been that these deals cannot close unless the landlord goes to the cost and expense of terminating these notices of commencement. By one report, these costs added between $15,000 and $20,000 to the cost of one transaction alone. And that does not include the disruption to the tenants making the improvements and their contractors. So the folks on the title insurance committee requested a fix which would allow title companies to rely upon the blanket notices, <U>at least with respect to bona fide purchasers for value without notice and lenders for value and without notice</U>. It was agreed at the Executive Council meeting that we on the CLC with work with the title insurance committee and the landlord tenant committee to find such a solution.</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">The solution they proposed (see the second attachment for the context) reads as follows:</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div style="MARGIN-LEFT: 0.5in" class=MsoNormal><U><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">If there is already a recorded lease, short form lease, memorandum of lease or notice of lease under s. 713.10(2)(b) with language prohibiting the lien against the lessor, any bona fide purchaser, mortgagee or other third party who takes any right, title or interest by an instrument executed by the lessor takes free of any recorded claim of lien for noncompliance with a demand made as stated above, if such claim of lien is recorded after the execution and delivery of the instrument to such bona fide purchaser, mortgagee or other third party, notwithstanding the previous recording of a notice of commencement, if any. </SPAN></U></div>
<div style="MARGIN-LEFT: 0.5in" class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">Some concerns have been voiced that landlords somehow could manipulate this provision to avoid liens. It should be noted, however, that a bona fide purchaser, by definition, is not an alter ego of the owner landlord. The net effect of this change would leave the lien still enforceable against the owner not complying with the DVC. It would only be unenforceable against innocent third parties.</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">A solution was proposed by Larry – to require a DVC to be served within 45 days of first furnishing – that would arguably reduce the risk of a lien “popping up”, but it would not eliminate the problem and, from what I understand, would not convince title underwriters to insure over an outstanding notice of commencement. So owners would still but stuck with the transaction costs of terminating every outstanding NOC for tenant improvement work in order to get title insurance on a sale or refinance transaction. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">This language has been outstanding since last month and, frankly, we owe a response to the other committees. I would propose moving forward with the suggested language quoted above as a reasonable compromise of several competing interests. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">Reese</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
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<div class=MsoNormal><B><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">From:</SPAN></B><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> Silvia Rojas [<A __removedLink__1293415__href="mailto:SRojas@TheFund.com?">mailto:SRojas@TheFund.com</A>] <br>
<B>Sent:</B> Friday, August 12, 2011 4:56 PM<br>
<B>To:</B> 'Arthur J. Menor'<br>
<B>Cc:</B> Reese J. Henderson, Jr.; '<A __removedLink__1293415__href="mailto:fred.dudley@hklaw.com">fred.dudley@hklaw.com</A>'; 'Kristopher Fernandez'; '<A __removedLink__1293415__href="mailto:leiby@mkpalaw.com">leiby@mkpalaw.com</A>'; 'Weintraub, Lee'<br>
<B>Subject:</B> Construction Liens</SPAN></div>
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<div class=MsoNormal> </div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">As a recap, attached is the original email attachment I had sent. Below is some additional alternative language to the third paragraph that I proposed after the feedback I received from some of you in this email:</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><U><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">If there is already a recorded lease, short form lease, memorandum of lease or notice of lease under s. 713.10(2)(b) with language prohibiting the lien against the lessor, any bona fide purchaser, mortgagee or other third party who takes any right, title or interest by an instrument executed by the lessor takes free of any recorded claim of lien for noncompliance with a demand made as stated above, if such claim of lien is recorded after the execution and delivery of the instrument to such bona fide purchaser, mortgagee or other third party, notwithstanding the previous recording of a notice of commencement, if any. </SPAN></U></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">A number of the construction law committee members would rather not have the third paragraph altogether – but that would leave a purchaser/mortgagee from the lessor completely unprotected. The first two suggested paragraphs on the attachment are merely procedural. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">Another suggestion from Larry Leiby with a different focus:</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt">I prefer leaving it at the first two paragraphs and, for your benefit, add that the request for lease must be made within 45 days of first work. It is no panacea but is certainly a middle ground that has the least opportunity for harm in my opinion.</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 11pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">Kris will be attempting to obtain feedback from several title insurance committee members by the end of the day on Monday. I hope that we can agree on some sort of protection to third party bona fide purchasers/mortgagees that relied on the original notice/memo/lease indicating the prohibition against liens on the owner’s interest. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">We do need a fix to this. The current language allows the request to be given even after the sale/mortgage of the property and allows the claim of lien to revert back to a previously recorded NOC by a lessee despite third party reliance on the previously recorded notice/memo regarding the prohibition in the lease. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt">Thanks to all who have participated in the discussions. </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 10pt"> </SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">Silvia B. Rojas</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">Sr. Underwriting Counsel</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">Miami-Dade Branch</SPAN></div>
<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">Attorneys' Title Fund Services, LLC</SPAN></div>
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<div class=MsoNormal><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">email: </SPAN><A __removedLink__1293415__href="mailto:srojas@thefund.com"><SPAN style="FONT-FAMILY: ; FONT-SIZE: 7.5pt">srojas@thefund.com</SPAN></A></div>
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