What Is a Title Defect?

A title defect happens because of claims made against that property by someone other than the current owner. Also called a “cloud on the title,” these defects can exist in many forms. For example, a lien against the property for unpaid child support, spousal support, or another debt can prevent a property from being sold until the debt is paid.  

Unresolved property disputes, missing heirs related to inherited property, and mistakes in the deed can also be title defects. All of these issues can stop a real estate transaction in its tracks. 

Why You Should Uncover Title Issues as Soon as Possible

Because title defects generally prevent a sale from moving forward until they are resolved, it’s crucial to uncover title issues or to share the potential problems with your lawyer as soon as possible. By being proactive, your attorney may be able to have problems resolved before they cost you. 

Of course, some title defects are known (like when you’ve received notice of a lien being placed on your property), while some are unknown (an unnoticed missing signature on the deed for the property you’re planning to purchase).  

The best way to protect yourself from unknown and unexpected title defects is to have your lawyer review all real estate documents related to property transfer. Your lawyer can do the research and help ensure the title is clear. 

How to Resolve a Title Defect

If your lawyer discovers a title defect, they can take steps to resolve it before the sale moves forward. The necessary steps depend on the title defect type and your situation’s facts. This work may involve: 

• Paying a debt, including paying back taxes;
• Locating a missing heir;
• Presenting a death certificate;
• Resolving a boundary dispute; or,
• Fixing an error on the deed.

Once the issue is resolved, and the title is clear, the property can be transferred to a new owner free and clear. However, if problems are not discovered and fixed before the title is transferred, the new owner may find themselves subject to unexpected liabilities, encumbrances, or even involved in real estate litigation. In addition, they may face difficulties if they ever try to resell the property, and those problems can come with an extensive cost.  

Resolving a title defect before a sale, or deciding to walk away from an unfavorable transaction, can be much more cost-effective than being forced to retroactively clear the title on property you already own. 

Contact an Attorney About Title Defects

If you are involved in a dispute related to a title defect or would like to prevent a conflict from occurring, get legal help from an experienced real estate attorney. To get started, call our Denver law firm at 303-534-4317 or send us a message.