A cloud on a title can disrupt your real estate transaction
When you’re looking to purchase a property, there are a few things you need to be aware of to ensure a smooth transaction. Upon consulting with a real estate attorney, they will investigate a variety of issues that may come to halt the sale. One of those things is the possibility of a “cloud on the title.” A cloud on a title refers to any issue or uncertainty that could affect the ownership or transferability of a property title.
Types of clouds that may appear in a title search
When closing on a property, one thing that a title company or closing company will do is send someone to the courthouse to review the property history – this is called a title search. They are looking for any issue that may make the pending transaction not fully legal as the seller may not have the full right to sell the property for a variety of reasons.
There are several types of clouds that can appear on a title, including liens, encumbrances, and easements. Here’s a closer look at what each of these terms means and how they can impact a property title:
Liens: A lien is a legal claim placed on a property by a creditor to secure payment of a debt. This could include unpaid taxes, a mortgage, or a judgment against the property owner. If a lien exists on the property, the creditor has the right to foreclose on the property and sell it to recover the debt owed.
Encumbrances: An encumbrance is any interest in a property that limits the owner’s ability to use or transfer the property. This could include an easement that grants someone else the right to use a portion of the property or a restriction that limits the type of building that can be constructed on the land.
Easements: An easement is a legal right granted to a third party to use a portion of the property for a specific purpose. This could include a utility easement that grants a utility company the right to access the property to maintain power lines or a right-of-way easement that allows someone to use a driveway or path on the property to access their own land.
What happens if a cloud is found on the title?
When a cloud appears on a title, it can create uncertainty for both the buyer and seller. If a buyer discovers a lien, encumbrance, or easement on the property they wish to purchase, they may be hesitant to move forward with the transaction. Similarly, a seller may have trouble finding a buyer willing to take on the title with the cloud still present.
If you’re considering purchasing a property, it’s important to work with a qualified real estate attorney who can help you identify any clouds on the title and advise you on how to proceed. In some cases, it may be possible to resolve the issue before closing, but in others, it may require legal action to clear the title.
In summary, a cloud on a title refers to any issue or uncertainty that could affect the ownership or transferability of a property title. Liens, encumbrances, and easements are common types of clouds that can appear on a title. Working with a qualified real estate attorney can help ensure a smooth transaction and avoid any potential complications down the line.
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