“Color of title” is a phrase used in property law that refers to a title to real property that may have the appearance of having good and valid title to that property, but in reality, the person either does not hold actual title (e.g., adverse possession) or there is a significant defect in the written documents supporting title (e.g., a defective deed) that makes it invalid.
Thus, according to the laws that govern real property, color of title fails to establish true ownership in land. In addition, color of title is also sometimes referred to as “apparent title” because at first glance it may seem as if the legal documents demonstrating title uphold a valid claim of title.
For instance, suppose a buyer purchases a parcel of real estate. By the end of the sale transaction, the buyer should have possession of the deed, which gives them title (i.e., ownership rights) to the parcel. If there is some type of defect in the deed, such as its terms do not comply with the real estate standards in the area, then it may render title invalid.
Taking this example one step further, suppose the buyer and the other parties to the transaction do not notice that there was an error with the documents supporting title. So, as is required with most real estate purchases, the buyer submits their real estate paperwork to the local registry office or to the county recorder of deeds of where the property is situated.
Without inspecting the documents further, all of the parties most likely believe that the buyer’s title is valid. Yet, because of the errors contained in the terms of the written documents supposedly verifying title, the buyer does not possess true title. Instead, the buyer has “color of title.”
What are Some Other Examples of Color of Title in Real Property?
The following list provides some other common examples of when a color of title situation may occur, which includes:
- If the buyer who is purchasing the real property believes that they are obtaining a valid title to the property, but later it turns out that the previous owner’s title to the property was actually defective. As such, the buyer and/or new owner’s title is now considered to be defective as well.
- When two or more persons purchase a particular piece of property and receive separate deeds to that same parcel of real estate.
- If a deed to a specific property was executed in a manner that makes it defective or questionable, such as if the deed was forged, or if the deed was not properly delivered and accepted.
One final scenario where color of title issues frequently arise is when a person acquires a parcel of land by adverse possession. Adverse possession is a way in which a person can obtain land by simply occupying it, instead of paying for it and going through the proper real estate procedures.
However, there are many different steps a person must take before acquiring land through adverse possession and these may vary depending on the relevant laws of the state where the property is located.
If the person successfully acquires the land through adverse possession, then it is said that they have complete physical control of that particular property, but they will not have title to it. The difference between possession and title is that title proves true ownership, whereas possession does not.
Thus, the color of title issue may come into play either when the adverse possessor attempts to sell the property and cannot prove that they hold actual proper title, or if the original owner brings them to court to try and eject them from the land.
Finally, in order for an adverse possessor to gain valid title, they will have to bring an action to quiet title in the local court that handles property matters.
What Does Having Color of Title Signify?
In general, color of title typically occurs in the form of a written document, which may serve as evidence that the buyer put in a good faith effort to obtain valid title.
This form of evidence can be significant when used in cases where a claim to an interest in real estate occurs by way of adverse possession or via an easement by prescription. In these instances, the state will usually ask the party to prove that they have probable title to the land in question.
The reason as to why it is so important to resolve color of title issues is because it can affect a person’s ownership rights. For instance, without proper title, title insurance companies will not issue title insurance to the property owner in order to secure it against financial losses.
Additionally, having invalid title to a property can also hurt the property owner’s chances of being able to sell the property. Alternatively, it can result in serious consequences to the buyer, such as having the already paid for parcel of property taken away from them by a party who holds valid title.
Do I Need to Hire an Attorney for Color of Title Issues?
If you believe that the title to your property may be defective, then you should consider consulting a qualified real estate attorney in your area. Your attorney will be able to advise you about the applicable laws in your state and can assist you with navigating the process of resolving your color of title issues.