If you have looked into purchasing a home and find out that the property has a cloud on the title, then that should stop you in your tracks. Having a cloud on a title means that there is potentially an issue with the property’s title, such as a lien being placed on it for unpaid taxes or other debts.
During your home purchase, you need to ask your attorney to perform a title search, so that you can find out if a cloud is on the title and to determine what it will take to have that cloud removed. Usually, you can have the cloud removed through a quitclaim deed or quiet title action, but both will slow down the sale and transfer of the property into your name.
What are some common reasons for clouds on titles?
There are several reasons why clouds could be on a title. Some of the most common include:
- Liens, which may be for tax debts, unpaid mortgage debts or because of the property being used as collateral for another loan. For liens, the owner, or new property owner, will need to pay off the lien to get the cloud removed from the title.
- Mechanic’s liens, which may be placed on the property if the contractor or subcontractor who performed work on the property was never paid
- Foreclosure, which can result in a restriction from selling the property
- Probate, which may cause a cloud if there is a problem with the property’s documents or there are claims against the property and estate
The most concerning cause for a title on a property is if fraud has occurred. For instance, if a fake deed was used, then a cloud may be placed on the home’s title until it can be determined who the real owner is. With this issue, it’s essential to wait to see if the person selling the home is the rightful owner, so you make a purchase that is legitimate.
Issues with clouds on a title aren’t necessarily a deal-breaker, but they can cause delays. Make sure to thoroughly review any clouds that appear on a title for a property that you’re interested in.