Buying real property is a complex process that can sometimes result in unwelcome surprises. Issues with titles are among the most frustrating of these. Buyers must always ensure that the title of the property in question is clear of any complications that might “cloud” or negatively impact the ownership of the property. Known as “cloud on title”, these problems can impact the ability of the buyer to obtain proper ownership of the property.
What are “clouds on titles”?
Clouds on titles refer negative issues or ambiguities regarding the ownership of the property that obscure the legal ownership of the property. If a seller has a second mortgage that he forgot about or if he allowed a hard money lender to record a deed of trust on the property, the title might have a cloud on it because the lender may have the right to foreclose on the property. Another example is where the prior owner of the property did not sell the property using a title company so old loans or old easements are still of record on the property even though they should have been released long ago.
These potential clouds on title make buying and selling real property a risky prospect if not handled correctly. Buyers could even find themselves in an unexpected battle for the title of the home they just purchased.
Can I identify properties with a cloud on the title?
The way to make sure that any clouds on title are found is to always use a title company when buying/selling real property, always obtain title insurance, and have a real estate attorney review the title report. Any time a mortgage lender is involved in the purchase of real property, the mortgage company will require that a title company is used. But, even if you are purchasing with cash or other consideration where a lender is not involved, you should always use a title company and have a real estate attorney review the title report before moving forward with the purchase.
Title checks reveal also chain of title issues that might indicate ownership problems. Title reports also reveal things such as easements and other types of liens like judgements.
How can I remove a cloud on title?
There are a few different ways to fix a clouded title. If there is a lien on the property, the solution can be as simple as paying the necessary debts. Another option is going to court and filing a civil lawsuit against the previous owners or lienholders to clear the title. This is known as filing a quiet title action and the lawsuit is levied against just about anyone and everyone who has a potential adverse claim to the title on the property.
Sometimes clouds on title can be cleared up by the party holding the adverse interest signing a quitclaim deed or release of lien. This can be done when the party holding the adverse interest can be found and is willing to cooperate.
The attorneys at Anthony Law Group are experienced in recognizing and removing clouds on title on properties and are available to help. Reach out to our team today!