In real estate, a full legal transfer of property includes a physical transfer and the clear transfer of title. If there are any defects or other encumbrances attached to the property, the seller cannot properly transfer full ownership.
Knowing what can make a title an imperfect one and how to remedy such issues can help both buyers and sellers avoid legal hang-ups down the line.
The perfect title refers to property ownership through a deed free of any liens or defects. Perfect title is occasionally referred to as a good, clean, or free and clear title.
Perfect title refers to a state of ownership resulting from a deed unblemished by liens or other defects. Such a deed provides the holder with clear ownership that a creditor or other claimant cannot challenge. The deed is optimal for a smooth sale or transfer of property.
It is essential to comprehend the distinction between title and deed. The title refers to the ownership rights of a specific asset, usually a unit of real estate. The deed refers to the physical document prepared for a sale or transfer. The deed lists the property’s legal details, such as exact location and any easements or liens on the property. When preparing to issue a mortgage with purchasing a property, a title company will comprehensively investigate the title history of that property. This research aims to uncover any hidden defects that would have to appear on the deed being prepared.
The title search may seem ancient in the age of electronic record keeping. Still, it protects the lender and purchaser against legal issues that could appear and dramatically jeopardize the value of a property. Below are some defects that a detailed search can discover.
Easements are third-party claims to the usage of some piece of a property.
The legitimacy of a former deed can be contested for various reasons. Perhaps it was made by someone not of sound mind, a minor involved, or an erroneously recorded familial relationship.
Formerly undisclosed heirs to a former deed holder may come forward to claim the property.
Creditors to a former deed holder may hold fair claims on the property to recover their debts. A typical example of this is unpaid property tax.
Human mistake in past deed preparation is the most typical defect. A human mistake can transpire in the public registrar’s office and the clerical work of any lender, appraiser, or title company previously associated with the property.
Once the title has cleared the title search, ideally in perfect form, the title company will deliver an opinion letter recapping its findings. It will also administer an insurance policy covering the lender and purchaser against any further unexpected defects in the title.
In real property law, the title gives the owner a bundle of rights in a portion of land, either in part or in whole. One of these rights includes the power to transfer or convey ownership. To do so, the property’s title must be free of any defects or legal burdens, known as encumbrances.
Issues that make the title imperfect are:
If any of these exist, an owner holds imperfect title to the property. These defects must be removed before a transfer can take place.
Having title to a piece of real property gives the owner the freedom to occupy, use, or modify as they see fit. It forms a bundle of legal rights for the individual holding it, and as long as there are no encumbrances or other problems, some or all of these rights are fully transferable.
On the other hand, a deed is a legal document (or documents) that transfers these rights from one person to another. According to the Statute of Frauds, it must be a written document 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 be filed appropriately to make them binding. But a failure to correctly record a deed only creates an imperfect deed, not an imperfect title. An imperfect deed is a paperwork issue, while an imperfect title means a flaw with the transfer of legal rights.
The direct result of an imperfect title is that the owner cannot lawfully transfer their interests to another individual. In many cases, owners are unaware of some encumbrance or other title defect until they are looking to assign, sell, or otherwise convey that property to someone else. Title searches and tracking the chain of titles are essential for the seller and the buyer. But how can they correct an imperfect title to make sure a sale or transfer is lawful?
The resolution is often to file a suit to quiet title in the county where the property is located. Filing a suit to quiet the title in the county is a judicial process. The owner asks the court to resolve any legal issues related to the property, 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 ownership inquiries to clearing liens and other encumbrances. These proceedings often use the expertise of title companies to identify problems and provide solutions.
Title issues in the sale and transfer of real property can create substantial legal and financial nightmares for all parties involved. That is why if you do happen to run into any of these problems, it is essential to seek the advice of a professional and experienced real estate attorney in your area.
Every jurisdiction has different rules and procedures concerning property disputes. An attorney can inform you of the laws in your state and outline the best strategy to resolve your particular title issue.
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