
Cloudy title is one of those terms that you don’t hear much about until it happens to you. And when it happens to a buyer or a seller, it can quickly tank a sale right before it’s ready to go through. To protect yourself as either a buyer or a seller, it’s essential to understand what a cloudy title is, how to keep yourself from having one, and what to do if you discover the house you want to buy or sell in New Orleans has a cloudy title.
WHAT IS A CLOUDY TITLE?
A cloudy title, also known as a cloud on title, is a document, lien, claim, or any other encumbrance that can invalidate or impair the title to a property or may cause that title to be questioned. A cloud on title typically arises when there are unresolved issues related to a property, such as foreclosure proceedings initiated before the property was sold, or there could be liens from lenders or contracts that the property owner consented to.
If the property’s seller didn’t pay for contracted construction or development work, the property also may have a mechanic’s lien. This type of lien stays in place until all labor and materials costs have been resolved, either by debt repayment or some other legal action.
When a seller acquires a property through an estate or inheritance, probate issues can result in a clouded title. These complications occur if the previous property owner died without clearly specifying the intended recipient of the property or if there are missing documents—such as death certificates—that create ambiguity about ownership.
Another less common situation that can cloud a title is fraud. If someone creates a false deed that is recorded as accurate, it can cast doubt on who owns a property.
HOW CAN I PROTECT MYSELF FROM CLOUDY TITLE AS A SELLER?
If you’re selling a property, the best way to know whether or not you may have a cloud on your title is to have someone perform a title search before listing the property for sale.
A title search, usually part of most standard home sales, can show you whether there are issues with the property’s title. Knowing about them before you’re in the midst of the sales process gives you enough time to clear up any problems by getting quitclaim deeds, paying outstanding debts, or pursuing other legal action.
Starting this process before you’re sitting with an offer on the table can save you a ton of time and frustration.
HOW CAN I PROTECT MYSELF FROM A CLOUDY TITLE AS A BUYER?
As a buyer, there isn’t much you can do to predict whether or not there will be issues with a cloudy title on properties you’re looking to purchase. Part of the sales process will be having a title search done on any properties you’re considering buying.
Sometimes, a cloudy title can be easily overcome by having the seller pay any money owed to a contractor, for example, or getting a quitclaim deed. However, not all situations are resolved this quickly.
To protect yourself in the event of a cloudy title, don’t hinge all your property purchasing hopes on one property. If you have any inclination there may be problems with the title to a property you’ve offered, keep looking until you get the all-clear.
As a buyer, you are not liable for anything related to a cloudy title, but one certainly can derail your home purchasing plans without warning.