Cloud on Title
A cloud on title is any document, claim, lien, or encumbrance that could impair or affect the owner's title to property, making the title unmarketable until resolved.
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Exam Tip
Cloud on title = any defect making title unmarketable. Quiet title action = court proceeding to clear the cloud.
What is a Cloud on Title?
A cloud on title is any outstanding claim, lien, document, or encumbrance that challenges or casts doubt on the property owner's clear ownership. These defects must be removed or "cleared" before the property can be sold with marketable title.
Common Causes of Clouds on Title
| Type | Example |
|---|---|
| Liens | Unpaid taxes, mechanic's liens, judgments |
| Encumbrances | Undisclosed easements, restrictions |
| Errors | Recording mistakes, misspelled names |
| Disputes | Boundary disagreements, ownership claims |
| Estate Issues | Unprobated wills, missing heirs |
| Fraud | Forged deeds, unauthorized transfers |
How Clouds Affect Property Sales
| Stage | Impact |
|---|---|
| Listing | May need to disclose known issues |
| Offer | Buyers may hesitate or lower offers |
| Financing | Lenders won't approve loans |
| Title Insurance | Won't insure clouded title |
| Closing | Cannot close until resolved |
Ways to Clear a Cloud on Title
| Method | When Used |
|---|---|
| Quitclaim Deed | When claimant agrees to release |
| Quiet Title Action | Court action to resolve disputes |
| Payment | Satisfy liens and judgments |
| Correction Deed | Fix errors in prior deed |
| Affidavit | Sworn statement resolving issue |
| Release | Lien holder releases claim |
Study This Term In
Related Terms
Title
Title is the legal right to own, use, and dispose of real property, representing the bundle of rights that come with property ownership.
Chain of Title
Chain of title is the complete, sequential history of all transfers of property ownership from the original owner to the present owner, used to verify clear and marketable title.
Quiet Title Action
A quiet title action is a lawsuit filed to establish ownership of real property and remove any clouds, claims, or disputes affecting the title, resulting in a court judgment that "quiets" all challenges to ownership.
Lien
A lien is a legal claim against a property that must be paid when the property is sold, serving as security for a debt or obligation.
Encumbrance
An encumbrance is any claim, lien, or liability attached to real property that may diminish its value or affect the owner's ability to transfer clear title.
Quitclaim Deed
A quitclaim deed is a legal document that transfers whatever ownership interest the grantor may have in a property without any warranties or guarantees about the quality of title, offering the least protection to the buyer.
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