Open Liens On Title

To transfer ownership of the property from the seller to the buyer in nearly all real estate transactions, title issues must be resolved.

Is it legal for the seller to sell the property? Are there any “clouds” or “defects” on the title to the house, such as judgments, liens, or bankruptcies, that could prevent the seller from giving the buyer “clear” or “marketable” title? How can you be confident?

Title companies say that they have to do “extraordinary work” to fix title problems in more than one third of all real estate transactions. The title company will look at public records, usually going back at least 50 years, to see if there are any deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments, or tax records from the past that are missing or wrong.

Any issue with the title must be resolved in order to provide the buyer with clear title, no matter how minor it may be. The buyer, seller, real estate agent, lender, and attorney involved in the sale will all receive a preliminary title report containing the search results.

The mechanic’s lien is prevalent. Before beginning any work, a general contractor or anyone else providing services to improve the property files these liens against the property. It ensures that they will be compensated; When the work is finished, the lien should be released.

The manner in which a mechanic’s lien must be filed, processed, and/or acted upon is governed by specific laws that differ from state to state. The District’s procedure may differ from that of Virginia, Maryland, or any other state in the nation. The jurisdiction in which the work was carried out will also determine whether it will prevail over any other liens on the property.

When the contractor fails to file a “satisfaction” of the lien and the lien remains on the property’s title, or when the lien is contested, issues arise. The title company must determine whether notice was given in accordance with state law and whether the lien was properly filed and recorded in public records. The majority of mechanics’ liens have a predetermined expiration date and cannot be extended indefinitely. In most cases, mechanic’s liens can be resolved, but the process can take a long time if the contractor has left the area or cannot be found, which could delay the closing.

With any one of our subscription plans, you will be able to see if there are any liens recorded against your home.

Another source of potential title issues is bankruptcy. A seller, for instance, could have bought a house as a single person and married a person who had just filed for bankruptcy. Both the discharge of the bankruptcy case and the new spouse’s signature on the deed would need to be confirmed by the title company. If not, a court petition would be required to exempt the property from the bankruptcy process.

When a divorced spouse either forgets to remove a lien for child support or fails to do so, even though the debt may have been settled decades ago, this is another common type of lien. A child might choose to sell the house they inherit from their father. The title search may reveal a lien that his mother placed years ago but has since been resolved, preventing the sale. To have clear title, the child would need to get his surviving parent to sign a “release of judgment” stating that the debt has been paid in full.

Also common are liens for unpaid spousal support or unpaid taxes. The American Land Title Association recently discovered that before a property can be transferred, spouses must address fraud and forgery issues, which have increased in frequency over the past few years. A typical case of spousal fraud involves one spouse signing the other spouse’s signature on a document or deed without telling the other spouse, either to remove an interest or add someone else to the title. It is analogous to when one spouse signs a joint tax return on behalf of the other, but the other spouse is unaware of their new responsibilities.

It may take days or even weeks to resolve the issue if the seller is unaware that a lien or other encumbrance is attached to the property. It’s possible that the seller got the house from a trust and didn’t know that one of the beneficiaries or co-owners is now living in another country and can’t be found. To transfer the title, the co-owner would need to sign, and if the owner can’t be found, the legal steps to fix the problem could take months.

The majority of remediation work performed by title companies is concealed. You might not even be aware that there were some title defects that were fixed before the closing. You might also be required to sign a document to get rid of the lien or title defect. One of three common forms can be filed to resolve many title issues:

• A quit claim deed clears the title between spouses or co-owners and removes an heir.
• A paid mortgage, spousal support, or child support lien is removed by a release of lien or judgment.
• Mortgage payments made pursuant to a deed of trust are recorded in a deed of reconveyance.

What about errors in the title that have not been recorded, or errors about which the title company is unaware?

Deeds affecting property of a deceased person, a deed following administration of an estate of a missing person who later appears, an undisclosed but recorded federal or state tax lien, errors in the legal description, a right of access wiped out by foreclosure on a neighboring land, and many other possibilities exist. Claims from the use of an “alias” or fictitious name are also possibilities.

You can conduct your own title search if you suspect that your property may have title issues—also known or unresolved liens. The public can access recorded documents that are filed at the county recorder’s or clerk’s office.

You might find a lien from someone you’ve never heard of or an unreleased mortgage that the lender didn’t report as paid in full.

With any one of our subscription plans, you will be able to see if there are any liens recorded against your home.