Nothing creates more stress for a home buyer or seller than a problem with the title to the property. A cloud on the title calls into question the right of the property owner to sell the property and can hold up the closing or even prevent the sale from occurring. An "action to quiet title" may be required to remove the cloud on the title and allow the sale to go through.
What is a Cloud on the Title?
A cloud on the title to real property is any condition or document indicating that someone other than the property owner may have a claim to the property that prevents the owner from having clear title. Examples of a cloud on the title include a mortgage or deed with no record of cancellation, an unresolved debt owed to a creditor or an unpaid tax debt. A prior failure to properly execute a deed can also create a cloud on the title by failing to accomplish a valid transfer of the property or an interest in the property, such as mineral rights or an easement.
Often, clouds on the title are discovered during the title search performed after a contract for the sale of property is signed. A title search is generally conducted for purposes of obtaining title insurance, which protects the buyer and the buyer’s mortgage provider from financial loss if the seller doesn’t have clear title. A seller without clear title to the property cannot effectively transfer ownership of that property.
Sometimes, the seller of real property knows of a cloud on title prior to the title search, for example, the interest of an ex-spouse in the marital home. A quit claim deed, whereby the ex-spouse or other third party gives up any claim or interest in the property, may be used to clear the title.
What is a Clear Title to Property?
A property owner with a clear title to property owns the property without any liens, mortgages or ownership claims by another party. A property owner with a clear title is able to effectively and legally transfer ownership of the property by deed.
Read More: How to Remove a Name From a Property Title
What Does it Mean to Execute a Deed?
A deed is a written document that conveys ownership of real property or transfers a specified interest in real property to another person or entity. There are certain requirements to validly execute a deed, which may differ by state.
In general, a deed must accurately describe the real property being transferred. A deed must identify the grantor who is transferring the property and the grantee who is receiving the property. The deed must be signed by the grantor and notarized. The grantor must deliver the deed to the grantee, and the grantee must accept it in order to effectively execute the deed and transfer title to the property. As a deed is a matter of public record, it must be recorded in the county where the property is located.
To be validly executed, a deed must also be made voluntarily, and the grantor must have the mental capacity to understand that the property is being conveyed to another. A lack of mental capacity on the part of a prior grantor could create a later title challenge.
An action to quiet title is a lawsuit that clears the property in question of any cloud on the title, establishing that the owner has the right to sell the property free of any lien, mortgage or other claim by another party.