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When developers are told there is a “cloud on the title” to land

On Behalf of | Jun 6, 2019 | Development |

It can take some time for California entrepreneurs to become familiar with all the lingo associated with real estate. One of the phrases that developers do not want to hear, but need to understand, is if there is a “cloud on the title” to a piece of property they want to purchase. Understanding what this means can help determine whether to move forward with the sale.

When there is a cloud on the title to a piece of property, it means that someone else may have an interest in it. For instance, if a previous owner had work done on the property and failed to pay a contractor or subcontractor, there could be a mechanic’s lien on the property. The same goes for unpaid taxes, an unpaid mortgage loan and more.

Other issues could arise from probate proceedings. If an individual once owned the property a developer intends to purchase, inheritance issues could have gone unresolved. Someone could come forward and claim to own an interest in the property. This could happen if a piece of residential or agricultural property was rezoned at some point into commercial property.

Moreover, sometimes, a person who does not actually have legal ownership of the land may sell it. The new deed would then be considered fraudulent since that person had no legal authority to sell the land. It is not hard to imagine that this would cause issues with a new purchase.

When developers move to buy a piece of land, they need to make sure that they will obtain a “clear title” to it. For this reason, a title search is essential in order to determine whether any clouds on the title exist. If so, it will more than likely be necessary to go to a California court in order to have them removed before the sale can go to closing.