You’re ready to sell your home or buy a new one. A contract is signed and everything looks good–until the real estate closing attorney informs you there will be a delay because there is a “cloud” on the title. What does that even mean?
Title is the legal means by which real estate is conveyed from one person to another. A cloud on the title is the way lawyers indicate that the chain of title has been broken in some way, so the seller cannot lawfully pass the property to the buyer at the present time.
Clouds on South Florida real estate can occur for a number of reasons. Some are minor and easily fixed. Others are more serious and harder to remedy. Using an experienced real estate closing attorney offers the best chance that the cloud can be removed and the transaction successfully completed.
Here are seven common causes of a cloud on title, along with information about how the Law Office of Gary M. Landau can help to clear them.
1. Improper Recording of Past Sales
One of the most common mistakes occurs when a prior property sale on the property contains an error on the deed that was recorded with the court. Any incorrect wording on this document that transfers property from one owner to another can create a cloud, such as a typo in a person’s name or a mistake in the property’s legal description. When one of my clients once tried to sell her condo, for example, she discovered that she was listed as actually owning the unit next door to the one she had lived in for many years!
Sometimes this type of cloud can quickly be fixed by a judge after a lawyer files documents with the court. Other times, though, correcting the record involves locating previous owners and having them sign a new deed. If prior owners are deceased, a probate of their estate may first need to occur.
2. Liens Placed on the Property
If you hired a contractor or another vendor to do work at your home, that company has the right to place a lien on the property if they are not paid in full. When someone has unpaid taxes, the IRS can do the same. Sometimes these back debts may have been paid, but the lien erroneously is not removed. In most cases, releasing a lien from the title involves having a real estate attorney work with the property owner and the lien-holder to reach a payment agreement.
A similar problem occurs when permits from when the contractor began working on the property are shown as still being open, occasionally long after the job was done. If the vendor is still in business and the work was completed, the permit can simply be closed after a city or county inspection. However, if the inspection fails, the seller may be required to hire a different contractor to finish the job.
3. Deceased Person Still Listed on the Deed
When two people own a home together as “tenants in common” and one passes away, even if the surviving person is the heir designated to inherit the property, they may do so legally only after the courts agrees. This is generally done through a probate of the estate (something the Law Office of Gary M. Landau regularly does). If this has not taken place and the surviving seller contracts to sell the home, the deal cannot be completed until the person’s estate is probated, a process that can take months or longer. This is why it is important to always do the probate and remove the deceased person from the deed well before you decide to sell. This issue does not apply when the deed lists both owners as “joint tenants with rights of survivorship.”
4. Missing Heirs
When a person named on a deed passes away, their property passes to their heirs named in their will. However, those heirs are sometimes absent or difficult to locate after the death. Family members may also contest a will if they suspect the deceased person was unduly influenced to leave the home to someone else. These scenarios can impact the title of a home and make it difficult to clear the title.
Foreclosure of a property can cast a cloud on the title. When a property is foreclosed upon, the lender or foreclosing entity becomes the owner. A buyer cannot purchase a house from a seller if the property is foreclosed on, even if the foreclosure happens after the contract is signed. Errors during the foreclosure process sometimes also impede title. Resolving the issue may require submitting documentation, or it might involve reopening the foreclosure proceedings to obtain an amended judgment.
In some cases a property is foreclosed upon but the owner subsequently makes appropriate payments and works out a deal to reclaim the house. At that time, the bank or other entity would need to deed the house back to the owner before a sale can be completed. Without that deed the title isn’t clean.
6. Fraudulent Activity
On rare occasions, forged or fabricated documents affecting property ownership may be filed in public records, obscuring the property’s rightful owner. During the title search, these forgeries may come to light and need to be addressed with the help of a real estate attorney to resolve the issue (hopefully along with law enforcement putting the perpetrator in jail).
One way you can prevent fabricated title documents for your home is via a program from the Broward County Property Appraiser called Owner Alert, which notifies deed-holders when someone is requesting a change.
7. Ignoring Easements
You may own your home and the surrounding land, but an easement on the property can restrict your ability to use certain parts of it as you might want. If a seller disregards public easements (or a neighbor’s boundaries), such as by putting a fence on land they are not legally entitled to, this can create a cloud until the problem is resolved.
Gary M. Landau: Your Real Estate Attorney Serving Broward and Palm Beach Counties
A complete and properly executed title search and examination by a qualified real estate attorney, combined with the purchase of title insurance (designed to protect the new owner from claims against the title), will provide peace of mind and help you avoid any unpleasant surprises. For more than 25 years, the Law Office of Gary M. Landau, P.A. has been practicing real estate law in Broward and Palm Beach Counties.
Whether you are starting the process of buying or selling a South Florida home or are in the middle of a transaction about to be derailed by a title problem, call our office at (954) 979-6566 or complete our online form today to schedule a consultation at no cost. We can work with you in person, over the phone, or on Zoom.
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction.