A property's ownership record is referred to as a chain of title. Sometimes, there are imperfections in the chain of title where someone who shouldn't be on record as having rights to the property still remains, creating a clouded title.
One example of a clouded title could occur if the property was involved in a divorce three owners ago and both the husband and wife remained on the title after the divorce, even though the wife got the house to herself. After she sold the house, her husband would still remain as an owner, creating a cloud. Clouds like these make it hard to transfer property and insure title and, as such, need to be removed.
Search the Title Records
Retain a title company or title attorney to search the property's title records and produce a title report or title commitment.
Review the Title Report
Carefully review the title report or commitment to identify any clouds on title. They can show up as additional owners or as exceptions, exclusions or notes to the title policy. If you don't fully understand the report, an attorney or title officer should be able to help you interpret it.
Execute a Deed of Reconveyance
Contact a lender that still has a paid-off mortgage or trust deed recorded against the property and have it execute a deed of reconveyance. The deed of reconveyance removes the lender's right to the property and clears any cloud that the old loan causes.
Execute a Quitclaim Deed
Contact any private parties that still show on the title but don't have rights to the property to have them execute a quitclaim deed, removing them from the chain of title and clearing the cloud.
Have Liens Removed
Remove any liens on the property by paying the debts that they represent and requesting that the party placing the lien remove it. If you have already paid the debt or if the lienholder refuses to remove the lien after your payment, you may have to petition the court to have the lien released.
File a Quiet Title Action
File a quiet title action if you have issues that you cannot resolve by having the parties on the title remove themselves amicably. A quiet title action is a special type of lawsuit where you prove your right to the title to the property and have any clouds on the title removed by the court. If your proof is adequate, all clouds on title will be removed by the court.
Clearing title issues is a complicated process, usually requiring the drafting of legal documents. If you don't have experience with this process and aren't familiar with your community's applicable laws, hiring an attorney or title company may lead to better results.
- Cornell University Law School: Legal Information Institute - Quiet Title Action
- Fraud Stoppers: Clouded Titles & Clouds on Title
- Consumer Financial Protection Bureau. "What is owner's title insurance?" Accessed August 1, 2020.
- Old Republic Title. “What Is Title Insurance and How Does It Work?” Accessed May 22, 2020.
- Zillow. "What Is Title Insurance and Do I Need It?" Accessed August 1, 2020.
- GovInfo. "Public Law 93-533-Dec. 22, 1974," Page 1728. Accessed August 1, 2020.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.