Defect of Record – Definition

Cite this article as:"Defect of Record – Definition," in The Business Professor, updated April 7, 2020, last accessed August 13, 2020, https://thebusinessprofessor.com/lesson/defect-of-record-definition/.

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Defect Of Record

The defect of record refers to a public record that reveals any encumbrance on the title of a property. A defect otherwise known as encumbrance is a claim, lien, or restriction on a property. When the title of a property is encumbered or defective, it fails to meet certain inspection specifications and must be recorded. The inspection catalog outlines the specifications or codes a title must meet, this also helps in recording the defects associated with a property. Tax and mortgage liens are the most common encumbrances on real estate properties. The defect of the record is a public record that outlines the encumbrances that may be on a property.

A Little More on What is a Defect Of Record

Before entering into a real estate contract, it is essential that the real estate broker and the potential buyer conduct due diligence to ensure that the property has no defect or encumbrance. The defect of the record is a public record, this means it is accessible to the public. A potential buyer must ensure he goes through this public record to check whether the property on which he is about to enter a deal is not in the record. For instance, if a property has a tax lien, it means the government has a claim on the property, which supersedes all other claims.

There are several reasons that could cause a property to be encumbered, these include financial and non-financial claims over a property by parties outside the holder of the property title such as a mortgage lender or a financial institution. Hence, if a legal claim, liens or outstanding debt exists on a property, such property is encumbered and must be captured in the defect of record. Investigating a property in the defect of the record is a due diligence a potential buyer must carry out before purchasing a property.

Types of Encumbrances Outlined in a Defect of Record

The common encumbrances on a property that the defect of record outlines include;

  • An easement: This is a legal right that allows another party to develop a property belonging to a party and also gives them the authority to prevent a property owner from using their property. There are three types of easement which are affirmative easement, an easement in gross and a negative easement.
  • An Encroachment: This occurs when a party uses a part of another party’s property. Interference on a property by another party different from the property owner is an encroachment and could cause an encumbrance on the properties of both parties until the matter is resolved.

Reference for “Defect Of Record”

https://www.investopedia.com/terms/d/defect-of-record.asp

https://help.sap.com/saphelp_globext607_10/helpdata/en/3b/…/frameset.htm

https://www.tutorialspoint.com/sap_qm/sap_qm_defects_recording.htm

https://community.servicenow.com/community?id=community_question&sys_id…

https://legal-dictionary.thefreedictionary.com/defect

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