Does it Really Matter if I Have a Cloud on my Title

When it’s time to sell your home, you will probably make repairs, do some cosmetic work, and then have your real estate agent take all of the necessary steps to market your property. Once you have accepted an offer and successfully negotiated with the buyer, it can be a shock to hear that there may be a “cloud” on your property’s title. If you get this kind of news near closing, you may be wondering: Does it really matter if I have a “cloud” on my title? The short answer? Yes.

What does a “Cloud” on a Property Title Mean?

In real estate law, if you hear that a property has a cloud on the title, this means that there is some irregularity on the property’s record that may interfere with one owner conveying it to another. The problem could be an unreleased lien, another party’s claim to the property, or any other encumbrance that could invalidate the existing titleholder’s right to ownership. Clouds ordinarily surface during title searches, and depending on the details, they can be highly problematic in a real estate transaction. Very few buyers are interested in accepting property with liens and competing claims attached.

Quiet Title Actions

An owner can live in a home for years and be unaware that clouds are on the title. This could be because of breaks in the chain of title or mistaken claims. They can also arise when real estate is purchased at tax auction sales or is inherited after an owner passes away. A homeowner who finds themselves in this situation may file a quiet title action to settle the issue. California law provides that this legal remedy is also available to anyone who holds an interest or a claimed interest in the property. When all the correct procedures are followed, a quiet title judgment is binding on all parties and all known or unknown persons, and the title will be clear.

Quiet title actions do not have a statute of limitations. However, the courts will look at the facts on a case by case basis. Generally, California courts have held that quiet title actions must be brought within five years of the first adverse claim of title or adverse possession, four years, when the claim is based on an instrument’s cancellation, and three years when the issue is predicated on fraud or mistake. Ordinarily, the statute of limitations does not run against an owner who has been in undisturbed possession of the property. The definition of “undisturbed possession” has been defined and shaped by the state’s appellate courts.  For example, recently, California’s First District Court of Appeal held in Huang v. Wells Fargo Bank, N.A., that a lender’s notice of trustee’s sale in a nonjudicial foreclosure did not disturb possession and therefore start the statute of limitations.

Action to Remove a “Cloud” on Title

An action to quiet title is different from an action to remove a “cloud” on a title. This remedy is appropriate when the cloud was created by filing a legal instrument. What usually happens is a legal notice called a Lis Pendens gets filed with a real property’s public records. This document notifies others that the property is involved in a lawsuit. Anyone who looks at your property records can see the notice. In effect, Lis Pendens dissuade others from buying a property that might have a legal judgment attached to it in the future. If the legal issue has been resolved, you will want to remove the Lis Pendens from your title record. To remove the notice, you would file an action to cancel or “reform” the instrument.

Having a clear title is essential as it will permit you to convey your property and purchase title insurance. Even if you are not selling your home at the moment, if you think there may be an issue with your title, it’s vital that you talk with an experienced California real estate attorney to evaluate your situation and consider your options.

Contact the Law Office of Raffy Boulgourjian

Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate cases. He has the knowledge and expertise to protect your real estate interests. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate legal needs.

 

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