How to Clear a Clouded Title

When my parents died a few years ago, sis and I discovered that the title to their home wasn't very straightforward. Instead of being solely in Mom and Dad's name, there were two other names on the title as well. These other names were a classic example of what is described as a "cloud" on a title.

A "cloud" on a title (also known as a title defect) is an outstanding claim on the title to a piece of real estate and means that the true ownership of a property is in question. A "cloud" is serious business since it can prevent the transfer of title to the property.

How does a title become "clouded" in the first place? It happens for any one of the following reasons:
--failure to document the repayment of a mortgage lien
--a deed that was signed incorrectly
--an address that doesn't match the property description
--an unpaid mechanics lien
--unpaid tax or irrigation levies
--unresolved legal debt
--missing heirs with a possible claim of ownership
--failure to transfer certain rights such as mineral or water right

How to clear a clouded title.

Some clouded titles are relatively easy for us do-it-yourselfers to clear, such as an incorrectly signed deed or goofed up address. Certain "clouds" are a bit trickier to remove, especially if there's a lien involved. In the case of Mom and Dad's property, the cloud on the title was caused by old liens, both which had to be fixed before the property could be transferred to the heirs.

In our situation, one of the liens was caused by the failure of the original owner to record the repayment of the mortgage. To clear the cloud on the title, we had to track down the original owners and have them sign a quitclaim deed which transferred any interest they had in the property. This wasn't a problem (thankfully) since the owners were still alive and living only a county away.

Dealing with the second lien was a little more dicey since it was the result of a decades-old unpaid mechanics lien. While we could have had the lien dismissed since it had passed the statute of limitations, a hearing would have been both expensive, time consuming and messy. For us, paying the debt was the easiest (and cheapest) option and cleared the last "cloud" from the property's title.

Had we faced a situation where the ownership of Mom & Dad's property was unclear, another method of clearing title would have been through quiet title action. Quiet title action is a legal mechanism that grants clear title to a single owner in situations where there's a chance that others may have a claim as well.

As my sis and I have discovered, clearing a "clouded" title can be complicated, time consuming, and expensive. Before purchasing any home, it's recommended that the title be researched thoroughly by a title company. If the title is "clouded," talk to a real estate attorney who can best advise you as to how the clouds can be removed and how much it will cost.

Additional articles by this contributor:
What is a paper road?
What happens if my property taxes are late?
How to find out who owns a house or vacant parcel?

resources:

http://legal-dictionary.thefreedictionary.com/clouding
http://www.kmdalegal.com/construction-law/how-to-remove-a-mechanics-lien/
http://www.wisegeek.com/m/what-is-a-quiet-title.htm