Closing on a home or other property is a highly anticipated event that can take months to come to fruition. Yet there are many legal and administrative steps along the way, and even one small mistake – an overlooked lien or human recording error – can derail the entire process. Such defects cost time and money to repair, often causing buyers to walk away from the transaction.
Local knowledge and prompt intervention are key to addressing title issues in Minnesota, where property records can be recorded in Torrens or Abstract formats. Title defects can delay or delay closing on a property, potentially prompting the buyer to walk away.
What are Title Defects in Real Estate Purchases?
A title defect is often referred to as a “cloud,” or an issue on the chain of ownership of a property. Title defects usually prevent property transfer. These come in many forms, including:
- Boundary and easement disputes, which may be uncovered in the title search process. These involve unrecorded access to the property, such as for a landlocked parcel nearby or for a utility.
- Unknown heirs or property inheritance issues that make the title difficult to transfer. Sometimes property is inherited informally, when a person dies without a will and a descendant simply takes over. This results in the title remaining in the name of a deceased person, not the seller.
- Errors in public records. Human error can introduce issues by recording the wrong information on a deed, such as boundaries that don’t correspond to the property data, or missing/wrong descriptions of permanent buildings on the site. Significant errors may require a corrective deed.
- Unpaid liens. If the owner did not pay taxes on the property, or a contractor held a mechanic’s lien but didn’t remove it when the work was paid for, these encumbrances remain on the deed and must be settled before a sale.
- Fraud. An unauthorized sale of property or forged signature on a deed may be uncovered in a title search. Proving the fraud and locating the real owner may be too much for a property buyer.
How to Cure Title Defects in Minnesota
The due diligence period may complicate a cloudy title because it requires buyers and sellers alike to meet a deadline to clear up issues and be ready for closing. An experienced real estate attorney can provide the most efficient solution to a title defect, using one or more of the following tools:
- Title Insurance. Mortgage companies usually require title insurance before a purchase, to protect against title defects. Such insurance may not salvage a purchase and sale doomed by a seriously defective title and the buyer must purchase their own to protect their interest. In the absence of buyer’s title insurance, a real estate attorney may negotiate with the seller to recover expenses incurred by the buyer and proceed with the property sale.
- Quiet title. This is a civil court action taken to remove disputes to ownership, such as liens, quitclaim deeds, and gaps in recordkeeping. Fraud, including forged signatures, is also resolved through a quiet title action. Once the quiet title issue is resolved, the plaintiff can take possession without a cloud on the title or concern that an unknown heir will try to take possession of the property.
- Scrivener’s error. Sometimes, a recording error is made on a title, such as misspelling the owner’s name or missing a digit on an address. Sometimes small human-created errors may be corrected in the recorder’s office but at other times they require an affidavit describing the corrective action.
- Release of lien. Liens can be specific to an individual owner when several names are on the deed to a property, or a lien can be released automatically when it is assigned to an owner in joint tenancy and that person dies. If a lien clouds the title, the seller should clear it or the buyer can negotiate clearing the lien by paying the overdue amount. An affidavit must be presented to the registry of deeds showing the release before a sale can be completed.
Understand Your Rights and Responsibilities in Title Issues
The real estate attorneys at Waypoint Law have over 15 years of experience handling complex title issues, contract negotiations, and deadline-driven closings. We work closely with buyers, sellers, and lenders to ensure that title defects are identified and resolved promptly, helping you avoid costly delays and protecting your investment.