Cloud on Title - Definition
Written by Jason Gordon
Updated at June 28th, 2021
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Table of Contents
Cloud on Title DefinitionA Little More on What is Cloud on TitleTypes of Issues That Can Cause a Cloud on TitleAcademic ResearchBack To: Real Estate, Personal, & Intellectual Property
Cloud on Title Definition
A cloud on title is a claim, encumbrance or lien hat makes the title of a property contestable or disputable. When there is an outstanding lien or claim on a property, the title roi the real property cannot be ascertained, hence, the lien or claim is a cloud on title. Clouds on title are often associated with real estate such as buildings, lands and other properties. Every homebuyer and real estate agent must do a thorough check of the property to be transacted to avoid the purchase of a real estate that has cloud on title.
A Little More on What is Cloud on Title
Generally, clouds on title impair the title of real property, it makes an individual's claim to the property invalid and disputable. A cloud on title is also referred to as title defect, it describes uncertainties and irregularities associated to a real estate title. Real estate agents or homebuyers can detect a cloud on title during a title search, since title search is an important requirement for mortgage loan. Hence, in every real estate transaction a title search must be dome of all properties to ensure there are no existing claims, liens or encumbrances on the property.
Types of Issues That Can Cause a Cloud on Title
There are several issues that can cause a cloud on the title of a property, the major issues are;
- An existing issue over who the actual owner of the property is, especially when there is an existence of a false deed which is legally questionable.
- Foreclosure proceedings on the property due to defaults in payments.
- Liens placed on the properties of delinquent borrowers.
- Inheritance issues between heirs to real estate properties can also create a cloud on title.
- Problems with the repayment of loan taken for the reconstruction or rehabilitation of the property.
- Fraudulent activities previously done with a property can cause a cloud on title.
To resolve a cloud on title, the concerned parties are required to start an action to quiet title or initiate a quitclaim deed.