Correcting Common Title Problems

When searching title, many issues may arise, most of which are usually correctable.

DEATH OF AN OWNER

It is common to discover along the chain of title a gap due to the death of an owner. For example, suppose a deed was granted to Bob and Mary Smith, then the title went from Mary Smith only to John Doe. What happened to Bob? Did he die?

Assuming Bob died before the transfer from Mary Smith to John Doe, there is no problem, assuming the property was held in joint tenancy or tenancy by entirety. In this case title automatically passed to the surviving joint tenant, Mary. All that is required is a certified copy of Bob’s death certificate.

On the other hand, if Bob and Mary owned the property as tenants in common, there may be a problem. You will have to go to the probate court to make certain that Bob’s will was probated and the property legally passed to Mary according to the instructions of Bob’s will (this will usually be evidenced by an executor’s deed from Bob’s estate to Mary).

PROPERTY TAX LIENS

This involves simply paying the back taxes and getting a receipt from the county treasurer or tax assessor.

MORTGAGE OR DEED OF TRUST

It is very common to find mortgages or deeds of trust that have been paid but not released. It is the lender’s obligation to file the release once the debt has been paid. If you are in a mortgage state, simply get the lender to sign a release of mortgage and record it.

The payoff of a note and release of mortgage or deed of trust are usually handled by a title or escrow company pursuant to a closing. In many cases, the loan is paid, but the release of the mortgage or deed of trust slips through the cracks in the process. If this is the case, find out which title or escrow company handled the last closing and ask them to either fix the problem or write you an indemnity letter. This letter is basically a guarantee that if any problems arise out of the paid off loan, the title company will legally defend and pay the claim.

INCOMPLETE DEED

You may come across a deed with a misspelling, incorrect legal description or incomplete notary acknowledgment. If the parties are still living, you can obtain their signatures on a corrective deed. If the problem is with the acknowledgment, look up the name of the notary with the state licensing division. Contact the notary and obtain an affidavit setting forth the missing information.

If the transfer is old and none of the parties can be located, you may be able to ignore the defect. The opinion of an attorney may be advisable in this regard (a cheaper and more effective method may be to find a title insurance company who would be willing to insure the title with the defect).

JUDGMENTS, FEDERAL TAX LIENS, WELFARE LIENS, ETC

You may be required to pay off the indebtedness and get a release of lien from the creditor. Since these are not your debts, it is not necessary for you to pay them off in full. You may try to bargain with these creditors and negotiate a discount on the amount owed in lieu of the full amount of the debt. Better yet, pay them a small amount to release the lien from the property. Releasing the lien still makes the underlying debt valid, but it is no longer a lien against the property. The creditor is still free to collect the amount due from the debtor.

MECHANIC’S LIEN

A mechanic’s lien is a strange animal, since it gives anybody with a pen and paper the right to place a lien on your property. Disgruntled, unpaid workers often place mechanic’s liens on properties to stop the sale of a property and blackmail the owner for more money (in all fairness, some property owners deserve it). If you are not in a rush, simply wait it out and the lien will fall off (check your state law for the time period – it is typically about six months to a year). If you are in a rush, you can either file a lawsuit or pay the contractor off.

It is good practice to get a contractor to sign a release of lien after you pay him for the work performed. If he is doing a lot of work and you are paying him in installments, get a partial release of lien after each payment. You can find a release of lien form in the appendix of this manual or at your local office supply store.

EASEMENTS

An easement can be cured by a quitclaim deed. This may require paying some money to the beneficiary of the easement. If the easement is no longer in use, you may be able to petition the court to remove the easement, claiming “abandonment” by the owner.

FLAWS, GAPS, AND CLOUDS

Sometimes the chain of title has gaps, flaws and unclear claims (“clouds”) which are not solvable. This may be because they are old and/or certain parties cannot be located. If this is the case, you may be required to file a “quiet title” lawsuit. This is a court proceeding in which you ask the court to clear up these problems and declare the rightful ownership of the property. If nobody objects, then the court will probably award you clear title.