When you buy a house you certainly don't want to inherit someone else's debts or legal problems. This is one reason for a title Insurance policy. Title Insurance protects or insures that you have "Clear Title" to your property. Clear Title means that there are no liens, claims, judgments or problems with the title. The aim is to define the undisputed owner of the property. If you are buying the property, we want that to be, you!
What is a Clouded Title?
When the title to a property is not "Clear" we refer to it as "Clouded". Title clouds hurt both the value as well as the marketability of a property. Clouds could include the following:
- Mechanic's lien-These are lien rights given to contractors. This is used for the purpose of securing the payment for work performed.
Homeowner's Association Assessment Lien- For HOA fees and/or violations.
Federal or State Tax Lien
Judgement Lien- These liens are generally created when someone wins a lawsuit against you and then records that judgment against your property.
Misspelled property's address on a deed that conveys title
A mortgage lien whose repayment hasn't been officially recorded
Deed which has been signed but was not properly recorded
Easement that has not been properly recorded
Unpaid property taxes
Failure to transfer property rights (mineral rights, etc.) to the appropriate owner.
Pending lawsuits (lis pendens) over ownership rights to the property.
How to Clear a Clouded Title
Clouds on title can be resolved in a couple of different ways. The most common method is by initiating a quit-claim deed. Once the lien holder has proof that the lien has been satisfied, they would sign the quitclaim deed. This releases any interest the lien holder has in the property.
The second and more complicated method is through the commencement of the action to quiet title. This is an actual lawsuit that determines the validity of any challenges or claims to the title of a property. The outcome would "quiet" any claims and/or challenges to the title.
Why Getting Clear Title is Important
It is certainly best to take care of these issues prior to putting a property on the market but unfortunately, this isn't always possible. Homeowners are often surprised to find liens from subcontractors they have no knowledge of. Additionally, improperly recorded easements are often surprises that are discovered only upon a new survey or Improvement Location Certificate.
Title clouds are generally resolvable with the right knowledge and a little legwork. This is why the choice of a Title Company is essential during a real estate transaction. If you have any questions about "Clouded Titles" please give me a call.