A cloud on the title refers to any potential problem or discrepancy in the ownership history of a property, which can jeopardize your ownership rights – and they crop up with surprising regularity.
While older homes tend to have complex ownership histories that can make them more prone to title issues, even a new property can have a troublesome title defect.
What causes title defects?
A cloud on a title can take various forms, but some of the most common:
- Outstanding liens: Unpaid debts, mechanic’s liens or other claims against the property can create a cloud on the title.
- Forgery or fraud: If there’s a suspicion of fraudulent activity in the property’s history, it can cast doubt on the title’s validity.
- Missing heirs or undisclosed interests: Ownership disputes, undisclosed interests or missing heirs can create complications.
- Recording errors: Mistakes in public records or clerical errors may lead to discrepancies in the title.
Typically, these issues are exposed in a title search before the final approval of a house sale. In fact, a title search and title insurance can be a buyer’s best tools against unexpected liabilities and problems associated with title defects.
How can you get rid of a cloud on a title?
Exactly how the title defect can be cured depends a lot on the nature of the defect. Some of the options include:
- Having the current owner pay off the lien (whether before the final sale or as part of the sales contract)
- Using a quitclaim deed to officially end another party’s interest in the property
- Using a quiet title action, which is a type of lawsuit that seeks to clarify ownership rights on a piece of property and settle (or “quiet”) those issues
Finally, the current owner of the property can resort to a lawsuit against the previous owner, if that is appropriate. That may be necessary to force a previous owner to pay liens or settle other issues that cannot be easily addressed without the court’s intervention.
Whether you’re a buyer or a seller, finding out that there’s a cloud on the title of a home can be upsetting – but seeking legal guidance can help you figure out the best path forward.