In real estate, a full legal transfer of property includes not just a physical transfer, but the clear transfer of title. If there are any defects or other encumbrances attached to the property, then the seller cannot properly transfer full ownership to it.
Knowing what can make a title an imperfect one, as well as how to remedy such issues, can help both buyers and sellers avoid legal hang ups down the line.
What Makes a Title Imperfect?
In real property law, title gives the owner a bundle of rights in a piece of property, either in part or in whole. One of these rights includes the ability to transfer or convey ownership. In order to do so, the property’s title must be free of any defects or legal burdens, known as encumbrances. Issues that make title imperfect are:
- Liens. Property liens come in all shapes and sizes, and are used to secure any number of debts or judgments against the property’s owner. A creditor can ask a court to attach a lien to secure debts like credit cards, loans, and medical bills. It can also be used to secure unpaid taxes, child support, or service agreements.
- Easements. This is the right to use or enter property for a certain purpose, such as using a road when landlocked or use of waterways. While this is a non-possessory right, it is nevertheless a legal right that protects the easement holder. An owner cannot convey a piece of property to eliminate an easement.
- Ownership Issues. One of the most obvious imperfect title causes is if there are any disputes or doubts as to ownership of the property. If you do not fully and legally own the property, you cannot transfer title.
- Recording and Description Errors. Imperfect title can also occur if there is confusion or mistake with the legal property description. It can also happen if any paperwork such as a deed is improperly filed or contains factual or legal errors.
If any of these exist, then an owner holds imperfect title to the property. These defects must be cleared before a transfer can take place.
Is Title the Same as a Deed?
Having title to a piece of real property gives the owner the right to occupy, use, or modify as they see fit. It creates a bundle of legal rights for the person holding it, and as long as there are no encumbrances or other issues, some or all of these rights are fully transferable.
A deed, on the other hand, is the legal document (or documents) that transfer these rights from one person to another. It must be a written document, according to the Statute of Frauds, and must be recorded with the proper state government entity such as a courthouse or assessor’s office.
An imperfect deed and an imperfect title are not the same, either. Usually, states require that a deed must be properly filed to make them binding. But a failure to properly record a deed only creates an imperfect deed, not imperfect title. An imperfect deed is a paperwork issue, while imperfect title means that there is a flaw with the transfer of legal rights.
How Do I Clear an Imperfect Title Issue?
The direct consequence of an imperfect title is that the owner cannot legally transfer their interests to another person. In many cases, owners are unaware that there is some sort of encumbrance or other title defect until they are looking to transfer, sell, or otherwise convey that property to someone else. This is why title searches and tracking the chain of title to is so important for both the seller and the buyer. But how can they fix an imperfect title to make sure a sale or transfer is legal?
The solution is often to file a suit to quiet title in the county where the property is located. This is the judicial process through which the owner asks the court to settle any legal issues connected to the property, thus transforming an imperfect title into a clear (often called marketable) title instead. Quiet title proceedings can handle any number of issues, from boundary disputes and and ownership questions to clearing liens and other encumbrances. These proceedings often use the expertise of title companies to identify issues and provide solutions.
Do I Need a Lawyer for an Imperfect Title Issue?
Title issues in the sale and transfer of real property can create huge legal and financial nightmares for all parties involved. That is why if you do run into any of these problems, it is important to seek the advice of an experienced real estate attorney in your area.
Every jurisdiction has different rules and procedures concerning property disputes, and an attorney can inform you of the laws in your state and outline the best strategy to resolve your particular title issue.