In United States property law, a cloud on title or title defect is any irregularity in the chain of

title A title is one or more words used before or after a person's name, in certain contexts. It may signify either generation, an official position, or a professional or academic qualification. In some languages, titles may be inserted between the f ...

of property (usually

real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixe ...

) that would give a reasonable person pause before accepting a conveyance of title. According to Investopedia, a cloud can be defined as: "Any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful. Clouds on title are usually discovered during a title search." Clouded title can thus be contrasted with a

clear title Clear title is the phrase used to state that the owner of real property owns it free and clear of encumbrances. In a more limited sense, it is used to state that, although the owner does not own clear title, it is nevertheless within the power of ...

, which indicates that a property is unencumbered. A cloud on title may reduce the value and marketability of property because any prospective buyer aware of the cloud will know that they are buying the risk the grantor may not be able to convey good title. Often, the discovery of a cloud on title will provide the grantee a reason to back out of a contract for the sale of real property. Some documents that affect title may be considered clouds, but nonetheless are unlikely to affect marketability or resale, such as with covenants, conditions and restrictions in a homeowners' association or subdivision. Examples of clouds on title include a property's address being misspelled in a

deed In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferrin ...

conveying title, a mortgage

lien A lien ( or ) is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the ''lienee'' and the per ...

whose repayment hasn't been officially recorded, a deed which has been signed but hasn't been properly recorded, an

easement An easement is a nonpossessory right to use and/or enter onto the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B". An easement is a property ...

that has not been properly recorded, unpaid property taxes, a failure to transfer property rights (such as mineral rights) to a former owner of the property, and a pending lawsuit before a court of law over ownership to the property. The usual remedy for a cloud on title is to file a civil action to quiet title which resolves the outstanding or unresolved cloud. Clouded title can cause delays or denials in receiving certain forms of

disaster recovery aid A disaster is a serious problem occurring over a short or long period of time that causes widespread human, material, economic or environmental loss which exceeds the ability of the affected community or society to cope using its own resources ...

, especially longer-term rebuilding assistance. This can be a more serious problem for low-income families who over time might not have been able to afford lawyers and legal fees for

probate Probate is the judicial process whereby a will is "proved" in a court of law and accepted as a valid public document that is the true last testament of the deceased, or whereby the estate is settled according to the laws of intestacy in the sta ...

, and who can face even worse financial problems in the wake of a disaster. This has led some states to make available low-cost mechanisms to transfer title.

Foreclosure

A cloud on titIe can be caused by foreclosure of a property. For instance, if a current title holder of a property does not pay the mortgage on that property, foreclosure would occur. When a property goes into foreclosure, the mortgage company becomes the owner of the property making it challenging for the current resident to sell the property. To remove the cloud on the title being caused by foreclosure, the resident would simply need to pay what is owed on their mortgage. This would remove the cloud on the title.

Probate

Probate is a process that occurs when a court oversees the distribution of a deceased individual's assets. Probate will sometimes cause a cloud on the title of property if an heir is not specified. To remove the cloud on title in this situation, the court will go through a process of notifying the deceased person's beneficiaries and making a decision on who will become the executor of the estate. This person will then be responsible for having the property appraised and listed.

Clerical Error

A cloud on title can be created by something as simple as a clerical error in the legal documents. An example would be a misspelling on a document or a document not being filed correctly. These types of errors can usually be resolved by filing a quitclaim deed. Quitclaim deeds should only be used for minor issues that cause a cloud on title due to their limited guarantees.

References

Property law {{law-term-stub

Foreclosure

Probate

Clerical Error

See also

References