A title search is a vital part of any real estate transaction. It ensures that the property’s title is clear of any issues that could affect ownership and usage rights. However, title searches often reveal various complications that must be resolved before closing. This comprehensive guide will explore common issues found during title searches, including unpaid taxes and tax liens, outstanding mortgages or judgments, easements and restrictive covenants, boundary disputes or encroachments, and missing or erroneous legal descriptions.
Unpaid Taxes and Tax Liens
Understanding Tax Liens
Tax liens are claims by a government authority due to unpaid property taxes. When property taxes are not paid, the local government can place a lien on the property, making it collateral for the debt. This lien must be satisfied before the property can be legally transferred to a new owner.
Identifying Unpaid Taxes and Liens
During a title search, public records are examined to identify any unpaid taxes or tax liens. This involves reviewing records at the county tax assessor’s office and other relevant governmental bodies. The presence of a tax lien can complicate the sale process, as it must be resolved before the transaction can proceed.
Resolving Tax Liens
To resolve a tax lien, the seller must pay the outstanding taxes. In some cases, the buyer and seller may negotiate who will pay the lien. The title company often handles the payment from the sale proceeds during closing, ensuring that the lien is cleared and the title is transferred free of encumbrances.
Outstanding Mortgages or Judgments
Outstanding Mortgages
An outstanding mortgage is a loan that the property owner has not yet fully repaid. The mortgage holder, usually a bank or other financial institution, has a lien on the property until the loan is paid off. During a title search, any existing mortgages must be identified and resolved.
Judgments
Judgments are court orders that require the property owner to pay a debt. If the owner fails to pay, the judgment can become a lien on the property. Judgments can arise from various sources, including unpaid loans, legal settlements, or other financial obligations.
Identifying Mortgages and Judgments
Title searches include a review of public records to identify any outstanding mortgages or judgments. These records are typically found in the county recorder’s office and court records.
Resolving Mortgages and Judgments
The seller must settle any outstanding mortgages or judgments before the property can be sold. This is usually done using the proceeds from the sale. The title company will ensure that these debts are paid off during closing to clear the title.
Easements and Restrictive Covenants
Easements
Easements are rights granted to others to use a portion of the property for specific purposes, such as utilities, access roads, or public pathways. While easements do not typically prevent a sale, they can affect the buyer’s intended use of the property.
Restrictive Covenants
Restrictive covenants are rules or restrictions placed on the property by previous owners or developers. These covenants can limit how the property can be used, such as prohibiting certain types of construction or activities.
Identifying Easements and Covenants
Easements and restrictive covenants are identified during a title search by reviewing deeds, plat maps, and subdivision records. These documents outline any rights or restrictions that apply to the property.
Addressing Easements and Covenants
While easements and restrictive covenants cannot usually be removed, understanding their impact is crucial. Buyers need to be aware of these conditions and consider how they might affect their plans for the property. In some cases, negotiations with the holder of the easement or covenant can lead to modifications.
Boundary Disputes or Encroachments
Boundary Disputes
Boundary disputes occur when neighboring property owners disagree on the exact location of their property lines. These disputes can lead to legal battles and complicate property transactions.
Encroachments
Encroachments happen when a structure or improvement on one property extends into a neighboring property without permission. Common examples include fences, driveways, or buildings that cross property lines.
Identifying Boundary Disputes and Encroachments
A title search includes examining survey maps, plats, and physical inspections of the property to identify any boundary disputes or encroachments. These issues are often discovered during a professional survey.
Resolving Disputes and Encroachments
Resolving boundary disputes and encroachments may require legal action, such as filing a quiet title lawsuit to establish clear property lines. In some cases, property owners can negotiate an agreement, such as a boundary adjustment or easement, to resolve the issue amicably.
Missing or Erroneous Legal Descriptions
Importance of Accurate Legal Descriptions
The legal description of a property is a precise way of defining its location and boundaries. Accurate legal descriptions are crucial for ensuring clear ownership and preventing disputes.
Common Issues with Legal Descriptions
- Missing Descriptions: Incomplete legal descriptions can lead to confusion about the exact boundaries of the property.
- Erroneous Descriptions: Errors in legal descriptions, such as incorrect measurements or references, can result in overlapping claims or disputes.
Identifying Missing or Erroneous Descriptions
Title searches include a thorough review of the property’s legal description in deeds, surveys, and plats. Any discrepancies or missing information must be addressed to ensure a clear title.
Correcting Legal Descriptions
Correcting legal descriptions may involve:
- Amending Deeds: Filing corrected deeds with the appropriate legal description.
- New Surveys: Conducting new surveys to obtain accurate measurements and boundaries.
- Court Orders: In cases of significant disputes, a court order may be necessary to establish the correct legal description.
Additional Considerations in Title Searches
Title Insurance
Title insurance protects buyers and lenders from financial loss due to title defects that were not discovered during the title search. It covers legal fees and other costs associated with defending against claims. There are two types of title insurance:
- Owner’s Policy: Protects the buyer’s equity in the property.
- Lender’s Policy: Protects the lender’s interest in the property.
Professional Assistance
Given the complexity of title searches, it is advisable to seek professional assistance from:
- Title Companies: Specialize in conducting title searches, resolving issues, and providing title insurance.
- Real Estate Attorneys: Provide legal advice and assistance in resolving complex title issues and disputes.
- Surveyors: Offer precise property measurements and boundary verification.
Conclusion
Conducting a thorough title search is an essential step in any real estate transaction. It helps identify and resolve issues such as unpaid taxes and tax liens, outstanding mortgages or judgments, easements and restrictive covenants, boundary disputes or encroachments, and missing or erroneous legal descriptions. By addressing these common issues, buyers and sellers can ensure a smooth and secure property transfer. Understanding the importance of a comprehensive title search and utilizing professional assistance when necessary will protect all parties involved and facilitate successful real estate transactions.
