What Does Title Mean?
When lawyers and other real estate professionals talk about "title," they are referring to who has legal ownership and the right to use a piece of property. Although the idea of legal title can be applied to anything, people most often use it in reference to real estate and automobiles, because those are substantial purchases which can have complicated ownership arrangements.
Problems with Title in Real Estate
Even though you may have bought a house, and paid off the mortgage, you may not necessarily have clear title to your property. Some of the "clouds" or "exceptions" to your title can include:
- Past ownership claims: Sometimes, when a particular piece of land has been in the family for generations, the original owner can be forgotten. Or perhaps someone took the land through adverse possession and there never was a clear land grant at the beginning. In these instances, someone from the past could come back to claim an ownership interest.
- Liens: Liens are like mini-mortgages placed on the property to force the property owner to pay a debt. Any liens on the property must be paid before the land can be sold.
- Covenants of record: These are promises that the original land owner made to someone else. For example, the owner could have promised his neighbor that the neighbor will always be able to drive an ox cart across the property. This promise was then written into each deed, every time the house was sold.
Buyer's Protections against Title Defects
Fortunately, there are several things you can do when buying a home to minimize any problems from a defective title. The first is to perform a title search, which most real estate attorneys would be happy to do. A title search will discover many of these defects before you buy a house, so that you know what you're getting into.
The second is to write a contingency into your home purchase agreement that states that if the current owner cannot prove that they have clear title, then you can back out of the agreement at no additional cost. That way, you're not obligated to buy anything with a defective title.
Finally, if you discover that there is a problem with your title after you purchase the house, one option is to buy title insurance. Title insurance covers you in case someone who thinks they have a claim to your land sues to quiet title.