Title DefectCredit Repair Definition
Any issue, claim, or encumbrance that clouds ownership rights to real property, making the title unclear or unmarketable.
Definition
A title defect, also known as a cloud on title, is any claim, lien, encumbrance, or irregularity that calls into question the legal ownership of a piece of real property or makes the title unmarketable. These defects can prevent the owner from freely selling, refinancing, or transferring the property. Common title defects include: unresolved liens (mortgages, tax liens, judgment liens, mechanic's liens), errors or omissions in deeds or public records, boundary disputes, claims from undisclosed heirs, forged documents in the chain of title, easements not properly recorded, or issues related to prior foreclosures or bankruptcies. Identifying and resolving title defects, often through title searches, title insurance, or quiet title actions, is crucial in real estate transactions.
Frequently Asked Questions
How are title defects discovered?
Title defects are typically discovered during a title search conducted by a title company or attorney before a real estate closing. The search examines public records (deeds, mortgages, liens, judgments, tax records, etc.) to trace the chain of ownership and identify any potential issues.
How does title insurance protect against title defects?
Title insurance protects the property owner (Owner's Policy) or the lender (Lender's Policy) against financial loss arising from title defects that were unknown or undiscovered at the time the policy was issued. If a covered defect later emerges, the title insurance company will typically defend the insured's title in court and cover associated losses up to the policy limit.
How can title defects be resolved?
Resolution methods depend on the defect. It might involve obtaining a lien release, correcting errors in documents through corrective deeds, getting quitclaim deeds from potential claimants, resolving boundary issues through surveys or agreements, or filing a quiet title action to obtain a court order clarifying ownership.
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