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Title defects are any claims or other factors that could cause the title to a property to be declared invalid. Sometimes referred to as a cloud on title, the title defect can be any one of a wide range of issues that cause the current title to be called into question. Examples of a title defect range from simple wording that does not comply with standards in place at the time of the issue of the title to the discovery of other claims on the property that were not acknowledged at the time the deed was issued.
Ideally, any title for property issued within a jurisdiction will comply fully with local laws. This means that all claims to the property are filed with the local government office that is responsible for maintaining property records. Depending on the location, this may be a registrar’s office, a probate office, or a recorder’s office. The claim information must be kept current in order to prevent the potential for a title defect. For example, if a lien is paid in full and discharged, records with the local government office should be updated accordingly.
More often, a title defect develops when some type of procedure is not followed in accordance with local law. The issue can be something as simple as the failure of the spouse of the current owner to sign the deed. Perhaps the previous owner did not properly sign off on the transfer of the deed to the current owner. If a lien of any type currently exists against the property and is not reported, the title issued can be considered defective and therefore null and void.
Real estate professionals often take steps to make sure there are no types of encumbrance on property before it is listed. This means investigating the background of the current title to make sure the paperwork includes all applicable signatures and registration with the local jurisdiction. At the same time, investigations to establish that encumbrances such as liens are also documented and known also take place. The idea is to make sure any issues that could create a title defect are identified in advance and corrected before a problem arises.