Even if you’ve bought and sold multiple houses in your lifetime, you might not have a clear understanding of what a real estate title is until there is a problem. You have paid for title searches, bought title insurance, and signed property deeds with little thought to what it all means. However, when a problem is discovered with the title, it is important that you understand what’s going on.
Title Refers to Ownership and Rights
Believe it or not, “title” does not refer to the document you and the other party sign to transfer ownership. That document is the property deed. Instead, title refers to your legal ownership of the property and the rights you have as the owner. When you buy a house, you “take title”—or ownership—of the property. When you sell a house, you transfer title to the buyer. However, before that transfer can take place, you must ensure that title is clear of any clouds or defects.
What Is a Title Defect?
The reason a mortgage company requires a title search is to make sure the title is clear and that ownership can legally pass to the new owner. When the title is not clear, you will be told that there is a “defect” or “cloud” on the title. This means that, somewhere along the line, there was a claim on the property that was never settled. Examples of title defects include:
- Liens on the property for unpaid child or spousal support, repair work, or other debt
- Unresolved boundary or property survey disputes
- Undisclosed owners, missing heirs, or conflicting wills
- Mistakes or omissions on the property deed, including missing signatures
- Delinquent property taxes
Until these issues are cleared up, title cannot be transferred to a new owner. This could mean paying back taxes, locating heirs, presenting a death certificate, or taking other legal steps. Because title searches are often not done when property passes from one family member to another or when a house is sold for cash, some of these issues can date back many years.
Examples of Title Defects I Have Cleared
Sometimes, clearing a title is a simple matter. Other times, it involves research and a lot of legal wrangling. One interesting case I had was on an old piece of property. I was representing the buyer of 22 acres of commercial property. My client insisted on an 80-year title search even though it is only legally necessary to go back 41 years. We discovered that when the property sold decades ago, only one owner had signed the deed. It turns out that his wife had died before selling the property, so she could not sign the deed, but he had not disclosed that fact. As a result, 80 years later, the title had a defect. To clear the title, I had to find the wife’s obituary, locate her death certificate, and file with the court. Because we discovered the defect, the property sale could not go through until we cleared it.
Another example of title work I have done is when I was able to prevent a title defect. My client hired me to help him transfer ownership of some property to his son. He did not want to do a title search; he just wanted to give his share to his son. Based on the information he gave me, I prepared the deed. Luckily, I discovered before it was too late that he had mistakenly given me the wrong information about how much land was his to give. I did the title search and prepared a new deed. If I had not done this, his son would have faced a title defect if he were to try to sell the property in the future.
Dealing With a Cloud on Title? Contact Our Ohio Real Estate Litigation Team Today.
Nothing is more disappointing when you’re excited about a property transaction than discovering a title defect. Never fear—I have seen it all when it comes to this situation, and I will put in the work to get it cleared up. If you are hearing the words “cloud on title” or “title defect,” run—don’t walk—to the phone and give me a call.