Clear title definition

What is a clear title?

A clear Title is a title without any type of privilege Where sampling from creditors or other parties who would raise the question of legal ownership. For example, a homeowner with clear title is the sole unchallenged owner, and no other party can claim ownership. A clear title is also called a “title proper”, a “fair title” and a “free and clear title”.

A clear title is needed for everything real estate transaction because it firmly establishes who is the owner. Securities companies must make a title search to verify claims or privileges of any kind against a title before it can be considered clear. Mistaken polls and unresolved building code violations are two examples of flaws that can make a title “dirty”.

How a clear title works

A clear title helps show if there are any outstanding financial responsibilities attached to the property and is necessary to demonstrate that an owner has the right to sell the property. The sale of a property can be contested if the legal ownership is not represented by a clear title.

The presence of privileges can create a cloud on the titlethat is, when an unreleased claim or lien invalidates or infringes the owner’s title to the property. For example, the current owner may still owe payments on an outstanding mortgage or owe contractors for renovations they have done on the property. The title would not be clear and the new owner would then be held responsible for resolve these privileges.

Once a title is erased, the deed can be recorded in the name of the owner. The deed is the legal document indicating who owns a property. If someone is buying a house, the title must be clear before the name of the new owner can be entered on the deed.

It is important to note that a property could potentially be sold while the liens are active. The law does not require the removal of liens before the sale of a property. However, the buyer would not be able to secure a mortgage or home equity loan, as the bank would research and discover past liens, which would have to be cleared for the financing to be successful.

Special considerations

There are many reasons why a title search can return showing the title as unclear. Just because someone is currently living in a house does not mean that the house has been titled or vested in that person. When it comes time to sell the house, the buyer may run into issues with the title, which means it is not clear who owns the property.

Heirs

Complications can arise with older properties where the heirs of a previous owner may still have an interest in the property. For example, a previous owner may have transferred part of a property to an heir who never played an active role as owner. The rights of said heir as partial owner may have been passed on to his descendants, who might not be aware of the circumstance.

Title issues can also arise if the heir to the property has never filed the deed with the county clerk’s office to transfer the property. When the heir goes to sell the property, title issues will arise as the deed would still show the family member who bequeathed the property to the heir.

Fraud

Having a clear title is also important to prevent cases of fraud. It is possible that a false act was placed on the public record. A fraudster may attempt to use a false act to engage in the illegal sale of a property.

Separation or divorce

Title issues can arise in situations where a couple has separated but never went through a divorce proceeding. If the couple owned the house jointly and someone moved after the separation, they would still own the house without a divorce. As a result, when the person living in the house goes to sell the house, title issues would arise because two people would be listed on the deed.

Trust

Ownership may have been transferred to a trust or other body that has a legal right to the property. This is why title searches are done to identify these issues before a potential buyer has committed funds to acquire a property.