Cloud on Title
Definition and meaning of Cloud on Title in real estate.
A cloud on title is any document, claim, or unreleased lien that casts doubt on the validity of a property owner's title, potentially preventing a clear transfer of ownership. It represents a potential encumbrance that must be resolved before a title insurance company will issue a clean policy.
In more detail
Clouds on title can arise from many sources, including unpaid property taxes, mechanics' liens, or a failure to record a mortgage release. They can also occur due to naming discrepancies in historical deeds or unresolved estate claims from previous owners. Buyers typically discover these issues during a title search conducted by a title company after going under contract.
Resolving a cloud on title may require tracking down the claimant to sign a quitclaim deed or filing a quiet title lawsuit in court.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Watch out for | Can delay or cancel a property sale |
| How to resolve | Quitclaim deed or quiet title action |
| Typical timing | Addressed during the escrow and title search phase |
A title search reveals a cloud on title in the form of an unpaid contractor's lien from five years ago, which the seller must pay off before the sale can close.
Frequently asked questions
Can you sell a house with a cloud on title?
It is very difficult to sell a house with a cloud on title because most buyers require title insurance, and lenders will not finance a property with unresolved title issues.
Who is responsible for clearing a cloud on title?
The seller is responsible for clearing any clouds on the title to deliver a clean and marketable title to the buyer.
Related terms
Sources & references
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