California Partition Law Blog
The purpose of this article is to discuss the commonly-discussed, but poorly understood, concepts of a “cloud on title.” A “Cloud on title” is an adverse claim, which may look good on its face, but is actually invalid or barred in some way. A cloud on title is a claim or encumbrance (like a mortgage or lease) resulting in unclear ownership of a property.
A cloud on title can also be a defect in a deed or lien that discourages future purchasers. Because it is unclear who owns the property, a cloud on title may prevent someone from becoming a future legal owner of a property. Beyond difficulties in selling the property, the cloud on title stays even if the property is transferred to someone else.
What are some examples of a cloud on title?
Any doubt that renders a title unmarketable must arise from a cloud on the title, and not merely some restriction on use or some other defect that may affect the marketability of the property. (see Hocking v .Title Ins. & Trust Co. (1951) 37 Cal.2d 644, 649-650.) If a claim of rightful ownership is made by a third party, that may cloud the title.
It is possible to figure out if there is a cloud on title through a title search. Title searches can be done through a county clerk’s office with some offering online searches. A title search examines public records to determine who legally owns a property. A title search covers documents such as deeds, tax liens, land records, etc. California property deeds can be found at the same county clerk’s office (also called the Registrar or Recorder office).
How to solve certain cloud on title issues
A cloud on title may stem from the inability to tell who truly owns the property due to past or present disputes, or improper record-keeping. Even something like the misspelling of a name on a deed is an improperly recorded sale resulting in a cloud on title.
To remedy a cloud on title issue, it is possible for the property owner to file a lawsuit. A quiet title action is different from an action to remove a cloud on title by the cancellation of an instrument, or for reformation. (see Civ. Code § 3412; Thompson v. Moore (1937) 8 Cal.2d 367, 372.) The distinction between an action to quiet title and to remove a cloud on title is that the latter one seeks in invalidate a particular instrument or piece of evidence, and therefore requires proof of specific facts to show the invalidity of the apparently valid instrument. (see Reiner v. Daniel (1989) 211 Cal.App.3d 682.)
The action is available to clear title against any kind of interest or adverse claim. A claim includes any legal or equitable right, title, estate, lien, or interest in property or any cloud on title. (CCP § 760.010; Water for Citizens of Weed California v. Churchwell White LLP (2023) 88 Cal.App.5th 270.) These types of claims can take several forms.
Alternatively, a cloud may exist from having a dead person’s name on the title. This also applies if a deed was improperly recorded but the previous owner has died. Having the probate done also means any heirs who do not want the property can disclaim their interest. Separately, if a successor to the decedent can prove they are entitled to the property, they can use an order determining succession to real property as a way to become the title owner. Ensuring the proper steps are taken following an owner’s passing can prevent future disputes around ownership from arising.
If the property was foreclosed on, that foreclosure creates cloudy title. For a foreclosure related cloud, the foreclosure proceedings may need to be reopened to obtain a final judgment. Alternatively, if the original owner worked out a deal to reclaim the house, the bank (or other entity) will need to deed the house back to the original owner.
Having work done on the home or property may cause a cloud. If a back debt remains, like a contractor not being paid for his work, a lien might have been placed by the contractor on the property. Construction permits staying open after a showing and sale of a property may also cause a cloud on title. If there are debts or other “payable” or easily remedied reasons for the cloud on title they should be resolved. If there are outstanding debts to contractors paying those will lift the lien and remedy a cloud on title. If open permits are causing the cloud on title, having the county or appropriate administrative body inspect the property will “close out” the permits and remove the cloud on title.
Previous owners’ usage of the property may also create a cloud on title if the prior owner ignored easements connected to the property. For example, a shed being impermissibly placed on public property. If a shed or fence is violating an easement it should be removed (i.e. the easement should be respected) and then the cloud will be lifted.
How to proactively prevent cloudy title as a property owner?
Property owners can protect against cloudy title by making clear contracts with contractors and checking title records. Property owners can also get title insurance. Title insurance insures, guarantees, or indemnifies owners regarding title defects, the validity of liens and title searches. (Hocking v. Title Ins. & Trust Co. (1951) 37 Cal.2d 644, 651; Lick Mill Creek Apartments v. Chicago Title Ins. Co. (1991) 231 Cal.App.3d 1654 (Lick Mill).) Title insurance lasts for the duration of ownership. It protects property owners and lenders if liens or encumbrances are discovered during a title search. However, it is important to be proactive, as property with cloudy title will not receive title insurance.
Conclusion
Cloud on title is an adverse title resulting in unclear ownership of a property. Cloudy title discourages future purchasers and prevents future legal ownership. Cloudy title can be found through a title search. If there is cloudy title on your property, there are a number of solutions to remedy common cloudy title causes.
The Underwood Law Firm has a team of experienced lawyers who can help resolve your cloud on title issues and help you pursue solutions like quiet title claims and probate and inheritance matters as they relate to partition. We are here to help.