A defective title, or a title defect, basically means that the title is not marketable. In the context of title to a piece of real estate, a defective title usually means that the land being sold by a party claiming to have good title is actually owned by someone else. Or, it could mean that other factors are involved, such as failing to comply with local real estate document laws.
Having a defective title can have seriously negative effects on a real estate sale transaction. It could cause the title to be declared invalid, which could cause confusion as to the true owner of the property. For this reason, defective titles are also called a “cloud on a title” or “clouded title,” meaning that it’s difficult to “see” who the proper owner is.
As mentioned, the most common type of title defect is where a person claims to have marketable title to a property, but it is in fact owned by someone else. In addition to this type of situation, title defects can take many, many forms. Basically, any type of factor that would render title invalid can be considered to be a title defect.
These may include:
- Simple issues with wording in the document that does not comply with real estate standards for the area
- Improper recording of ownership
- Failure to include the signature of a party that is necessary to the transaction, such as a spouse
- Previous liens and other encumbrances have not been removed (the title needs to be free of encumbrances to be marketable)
- Failure to follow recording or filing procedures when recording real estate documents
For this reason, it is very important that title defects be discovered and properly addressed well before the property is sold or transferred. This often requires close interaction between purchasers, sellers, mortgage companies, real estate appraisers, and lawyers. Investigating the background of any real estate title also involves predicting any potential defects that might arise in the future.
If you have discovered a defect in the title to your property, you will need to remedy the defect to avoid having your title being declared invalid.
Most of the time, this can be accomplished by conducting a title search at your county recorder’s office. This office stores all the records for real estate transactions, and should reveal the true owner of the property in question.
If this does not shed light on the situation, a dispute over a defective title can be resolved by filing a “quiet title” action. This is basically lawsuit requesting the court to determine who the valid owner of the property is. During the proceedings, the court will examine all the documents and facts involved to reach a conclusion.
Finally, defects in a title can be avoided by examining the records for the property prior to any transfers. However, even good faith attempts at record searching can overlook defects that are hidden or difficult to identify.
A defective title can make a real estate transfer more complicated and can delay the process. If you have any issues regarding a defective title, you may wish to contact a real estate lawyer for guidance. A lawyer in your area will be able to explain the rules in your area. Also, you may need the assistance of a lawyer if you will be filing any type of lawsuit in relation to your property title.