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The following is a list of some of the more common matters that would cloud title to real property and render a property uninsurable.
1. Unreleased Mortgages. It is common that a seller’s mortgage, or even that of a prior owner, is not properly released despite the fact that the loan was paid off.
2. Errors in Recorded Documents. Typographical errors in deeds and other documents recorded in land records create title defects. Misspelling of a person’s name or an error in the legal description of the property being sold are common errors. Missing or improper notarization of signatures is another problem that can cause title issues.
3. Missing Will. Property sold after being transferred from a decedents’ estate can be problematic. A property owner may die without anyone’s knowledge of the existence of their will. In later years, if the will is discovered, the heirs can assert a claim to the property they were to inherit.
4. Unpaid Liens. A lien is an interest someone has in a property to secure an obligation of the owner. They can include liens for unpaid taxes, water bills, homeowner’s association dues, legal judgment awards and bills to contractors for property improvements. Liens attach to the property, so even those of prior owners remain as a cloud on title after the property is transferred.
5. Invalid Deeds. Recorded transfer deeds may be invalid because the party transferring the property lacked the capacity or authority to do so. For example, a minor or a person lacking mental capacity cannot execute deeds conveying property. Likewise, a person acting under an inapplicable or expired power of attorney cannot. Sellers who have filed for bankruptcy protection cannot sell property without court approval. Property owned by business entities (e.g. corporations, limited liability companies, partnerships), trusts or even churches can only be sold by persons given the legal authority to sell that property.
6. Boundary Issues/Disputes. “Survey matters” are fairly-common title defects. Disputes as to location of boundary lines and violations of build restriction lines can render title uninsurable.
7. Lack of Access. Real property must be accessible from a public street.A lot that is not adjacent to a public street (i.e. surrounded by other lots) would require that a perpetual ingress/egress easement for access be recorded in the land records.
8. Missing Heirs. Title to land passes upon a person’s death to their heirs; however, sometimes when administering estate, heirs are forgotten or can’t be located. These missing heirs can emerge years later to claim their interest in real property.
9. Forgeries. Any number of instruments of title can be forged or fabricated, and only be revealed as such years later. They could include transfer deeds, powers of attorney and documents releasing mortgages and other liens.
10. Encroachments. When structures such as buildings, fences and patios that are supposed to have been built on one parcel of land is, partially at least, built on a neighboring parcel, a title defect exists.