What is Clear Title and Why Should it Matter to You?

It seems like it should be obvious, but you should fully own something before you attempt to sell it. And yet, there are a surprising number of cases every year where someone attempts to sell a property without clear title, which is akin to selling real estate they do not entirely own. Why does this happen, and how can the issue of clear title affect people trying to buy or sell real estate?

Defining Clear Title

Put in simple terms, a property is considered to have clear title when it is free of any encumbrances that would bring into question the legal ownership of the property. Not only does this mean that the person or people attempting to sell the real estate must have full ownership of the property, but it must not have any financial obligations attached to the property that might complicate the sale. This includes any liens, levies, or other financial interests that someone might have in the property.

How Clear Title Can Be Impaired

There are a number of ways clear title can be impaired. Although rare, someone could simply be attempting to sell a property they do not own, or which they co-own with someone else who has not consented to the sale. More commonly, however, clear title is impaired by financial obligations attached to the property that give other people an interest in the property outside of simple ownership.

For example, if the current owner of a property bought the property with a mortgage, and the mortgage is not paid off, the bank that issued the mortgage would have a financial interest in the property (which they could foreclose upon if the mortgage is not paid). If a property was used as collateral to secure a loan, or if a creditor has taken out a lien against the property, that could also cause a similar issue if the loan is defaulted on. Alternatively, any unpaid property taxes could also impair clear title by creating an obligation to the government authority you owe the taxes to.

Another potential issue that can arise relates to easements and covenants. Easements are non-ownership property rights that others have over your property, such as the right to cross your property to access a waterway or road. A covenant is a restriction placed on a property with respect to how the property can be used, such as height or size restrictions that are often placed on properties by homeowners’ associations. While you can sell a property with an easement or covenant, they must be disclosed to a buyer before a property can be sold with clear title.

Clearing Your Title

If you want to make sure your title is clear before you try to sell your real estate, there are a few steps you should take. The first, and perhaps most important, step you can take before selling your property is to perform a title check, which will identify any potential legal issues related to ownership of the property. Second, you should make sure there are no outstanding mortgages, liens, or other debts attached to the property before you attempt to sell it. Finally, make sure your property taxes are paid off to avoid potential issues from your local government.

If you are considering putting your home on the market or are attending to another matter that falls within real estate law, we can help you avoid the common pitfalls that beset many New Yorkers in these transactions. David J. Lorber & Associates, PLLC, in Setauket, New York, offers comprehensive real estate representation. Call us at (631) 750-0900 or contact us online to schedule your free initial consultation today.