Title records are public records, usually held at the county courthouse, which lists ownership, encumbrances, liens, and other real estate interests and their priority for each parcel of land within the county. Title records are maintained by recorders of deeds, city or county clerks, county treasurers, collectors, and clerks of court, and include written documents, such as deeds and mortgages, and other records, such as tax, marriage, and probate records, and judgments, that may affect the title of a property. Title records are important in establishing the ownership of a property, and provide notice of any encumbrances or interests held by 3rd parties. Thus, these records are usually searched, often by title companies who ensure good title to the property, prior to the purchase of property.
Recording Documents that Affect Title
Recording is the deposition of written documents pertaining to a parcel of land in the public record, which, in most cases, is in the courthouse of the county in which the real estate is located. Recordings provide information for government authorities and prospective purchasers of any real estate in the county about the current owners, encumbrances, liens, and other interests in the real estate.
The details of recording are stipulated by state law. Most states require that any document that affects either the title or the interests in the land be recorded. Any liens are generally given priority by their date of registering, with earlier liens having higher priority than later recorded liens. However, tax liens have higher priority over all other liens regardless of when they are recorded or even if they are not recorded. Real estate interests also have a priority order, with earlier recorded interests taking priority over later ones.
Before a document can be recorded, it must satisfy the requirements of the recording laws of the state in which the property is located. For instance, state law may stipulate that the documents be a certain size, color, or quality. Some states require witnesses, for instance, or that names be printed below the signatures. Some states also require a certificate of real estate value and the payment of current property taxes for recording.
Since the title record serves as a central repository of information about a parcel of land, anyone who wants to record a lien is expected to file a notice of it in the records, and anyone considering a future interest in the property, such as a buyer or lender, is presumed to know what can be found in the title records and by inspecting the property. A notice is simply information — in real estate, it is information that can be learned either from the title record or by inspecting the property. The parties in a real estate dispute cannot claim ignorance of facts that could have been easily been learned by inspecting the title record or the property itself.
There are 3 types of notices:
- constructive notice
- actual notice
- inquiry notice
Constructive notice is the legal presumption that anything recorded in a public record can be known by anyone who wants to know it. In real estate, constructive notice is also anything that can be learned by inspection of the property.
Actual notice is the direct knowledge that one has of the property, either by direct inspection, possession, or other means. If it can be proved that a person had actual notice, that person cannot deny any fact in a dispute simply because it was not recorded in the title record.
Inquiry notice is information that should impel a reasonable person to make further inquiries about some aspect of the property. For instance, if a path crosses the property, but there are no easements listed in the title record, then it would behoove the buyer of the property to inquire further about the path.
Not all liens are recorded. Statutory liens, such as inheritance taxes and corporate franchise taxes, are not recorded. Real estate taxes and special assessments, which are taxes assessed to pay for a public improvement that benefits the property, are not recorded until well after payment was due. Information about these off-the-record liens must be obtained from the municipalities, or receipts may be available to show that the real estate taxes were paid.
Chain of Title
Chain of title is the list of owners from the 1st to the last, forming a chain of conveyances from 1 owner to the next. However, if this chain is incomplete, then there is a cloud on the title, which indicates that the present owner doesn't have a marketable title. The chain can be broken because of a deed forgery, or it may be something simple such as a previous owner using a different name when conveying the title from the name used in acquiring the title.
This cloud on the title can be remedied with a quiet title suit, in which a plaintiff seeks to clear title by bringing potential claimants to court, where they must establish that they have legal title to the land or else they will estopped from claiming any interest in the land later.
Title Search and Abstract of Title
A title search is a search of all title records of a particular property to ascertain if the current title is good. The chain of title is examined from the root of the title, which is the 1st record of the chain stipulated by state law that must be considered up to the present title. Some states still require, as all did at some point in the past, to follow the chain back to the original owner, or as far as records allowed. However, many states have adopted the Marketable Title Act, which requires that the chain be complete only back to 40 to 60 years, depending on the particular state law. The Marketable Title Act serves as a statute of limitations for potential claimants. Other public records, such as wills, court records, and tax records may also be examined.
A title search is usually done by an abstractor, who summarizes the information as an abstract of title, which lists all recorded documents chronologically from the root to the present time, and lists all liens and encumbrances along with their current status. There is also a list of all public records that were examined in writing the abstract of title as a record of what was actually examined.
An abstract update is sometimes used if the property was recently sold, in which case the title abstract that was used in the previous sale is simply updated with any new documents, claims or legal actions that may affect the title of the property.
Most real estate sales contracts stipulate that the seller is conveying a marketable title to the buyer. A marketable title is one that has no defects in the title record and is not contingent on dubious law or facts. Other qualities of a marketable title are that it will not give rise to litigation and interfere with the buyer's enjoyment of the property, and that the buyer will have no problem selling the property in the future. However, these last 2 qualities cannot be ascertained with certainty, because of the possibility that the title has hidden defects, which are not necessarily discoverable at the time of the sale. However, there are various methods of establishing ownership that can be called a best-effort approach, and is why most buyers and lenders require title insurance.
Establishing Ownership: Certificate of Title, Torrens Certificate, and Title Insurance
Because of the many ways that a title can be impaired, a title record or deed does not prove ownership. Even a general warranty deed only conveys the owner's interest in the real estate — it is not proof of ownership. Indeed, there are no definitive ways to prove that a title is good, but there are 3 ways to increase the likelihood that the title is good, and, therefore, marketable:
- a certificate of title,
- a Torrens certificate,
- or title insurance.
A certificate of title is an opinion by a title company, licensed abstractor, or an attorney that the title is good on a specific date based on the information in the title record and other public documents. Often used in place of a certificate of title is a title abstract and an attorney's opinion of title.
Although lenders and buyers often request a certificate of title as proof of ownership, it is flawed in that it cannot reveal title defects that are not in the title record, such as execution by minors or the mentally incompetents, or the use of forged documents in a past conveyance, or that the title was not conveyed in conformance to law or that someone who did not have title executed the deed. These acts give a semblance of conveying title — hence, the expression under color of title— but because of some defect, the title has not been legally conveyed.
The Torrens system is a title registration system that eliminates the need to do a title search. In the few states that still use the Torrens system, the buyer of a property proves and registers his ownership at the court of the county in which the property is located. The registrar of titles then issues a Torrens certificate certifying that the registered owner has clear title to the property. The original Torrens certificate remains in the registrar's office, where mortgages, judgments, and other liens are listed. However, taxes and assessments are not generally recorded with the Torrens record. If anyone successfully establishes a claim to the property, then they are compensated from a special fund. Hence, the Torrens certificate establishes ownership.
Because of the difficulty of proving unencumbered ownership in most states, most real estate buyers and lenders require the purchase of title insurance, which protects mainly against hidden defects. Different policies provide different amounts of coverage, but most policies do not cover any defects or liens that are known to the buyer nor do they cover any changes in zoning or other actions by the government, such as condemnations. Any additional exclusions will be listed in the policy. More information can be found in this article: Real Estate Title Insurance.
Quiet Title Action or Suit
The owner of real estate with less than a general warranty deed can file a quiet title action to substantiate that the owner has complete rights over the parcel of land or to remove any cloud on the title. A quiet title suit is also used to verify the claim of the owner over an adverse claimant. Additionally, a quite all-time title action can also extinguish easements or release a dower or curtesy interest in the real estate.