When you purchase a home, there is an entire legal process in place to transfer the title of the home, or the legal ownership rights of the home, to you. Evidence of title is reflected in legal documents called deeds. While this sounds like a very straightforward process, it is a lot more complicated than simply handing over your money and taking the keys. There are several cases when the title wouldn’t be clean, and therefore, you might not be the rightful owner to the property or there might be restrictions on your use of the property. While these instances are uncommon, they do happen. Here are three title defects that could occur:
Liens:
- Liens are a right to possession of a property belonging to another person until a debt owed by that person is discharged. Some examples of liens include a lien placed by the government for unpaid property taxes or a lien placed by a contractor or mechanic for unpaid services.
Past ownership claims:
- Past ownership claims occur when someone from the past appears and claims a right to property ownership. These typically happen when a property has belonged to a family for generations and some long-lost relative feels entitled to ownership. Another instance of a past ownership claim could be if there was unlawful possession of the property somewhere along the chain of title (think of it as the genealogy of ownership).
Covenants of record:
- Covenants of record are promises that the original owner made in the deed to someone else. This could be something like the use of the driveway for parking or the use of a storage shed.
Clearly, the rightful ownership of a home is not always black and white. Fortunately, a good title company and title insurance will protect you and your lender from any monetary loss due to possible title defects. For more information on title and title insurance visit our Investor Resources.
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