Legal Definitions - cloud on title (cloud)

A cloud on title refers to any unresolved issue, claim, or defect that casts doubt on the clear and undisputed ownership of a piece of real property. It suggests that someone other than the apparent owner might have a legitimate interest in the property, or that the current owner's rights are not fully secure or complete. Such a "cloud" can make it difficult to sell, mortgage, or transfer the property because it creates uncertainty about who truly holds all rights to it. Lenders and title insurance companies typically require these issues to be resolved before they will approve a loan or insure the property's title.

Here are some examples of situations that could create a cloud on title:

• Unrecorded Utility Easement: A homeowner decides to sell their property. During the title search, it's discovered that a previous owner granted a local utility company an easement to run a pipeline across the backyard, but this agreement was never formally recorded with the county recorder's office.

  How this illustrates a cloud on title: Even though the utility company has been using the easement for years, the lack of official record means there's an unrecorded, yet valid, claim on a portion of the property. This creates uncertainty for a potential buyer about their full rights to the land, as the utility company could assert its right to access the property at any time, potentially affecting future development or use.

• Omitted Heir in Probate: A property owner passes away, and their will leaves the house to their two children. However, due to an oversight, only one child's name is included on the deed during the probate process, while the other child's interest is not formally transferred. Years later, the child whose name was omitted decides to assert their rightful claim to half of the property.

  How this illustrates a cloud on title: The omitted heir's claim represents an outstanding, legitimate interest in the property that was never properly resolved in the chain of ownership. Until this claim is addressed (e.g., through a new deed or court action), the title to the property is not clear and complete, as there's a question about who truly owns the entire property.

• Conflicting Property Surveys: A property owner attempts to refinance their home, and the lender orders a new survey. This new survey reveals a discrepancy with an older survey on file, indicating that a small strip of land along the property's boundary, which the current owner has always maintained, might actually belong to the adjacent neighbor.

  How this illustrates a cloud on title: The conflicting surveys create an ambiguity regarding the precise boundaries and extent of the property being claimed. This uncertainty about the exact land owned constitutes an apparent outstanding claim on a portion of the property, making the title unclear until the boundary dispute is legally resolved.