As a probate and estate attorney, located in Summerville, South Carolina, I am often asked how and why real estate titles could be defective. Your home may be new to you, but every property has a history. Title problems can turn a home that you bought for $250,000 into one that’s worth $1. A thorough title search can help uncover title defects tied to your property before you buy. And, subject to the terms of the policy, your title insurance provides protection for you from title problems that may become known after you close your transaction. Title problems are more common than may you think.
In this article, I will explain defective and unmarketable titles, common title defects and the ways in which title defects can be remedied.

What is a Defective and Unmarketable Title in South Carolina?

A defective and unmarketable title is a title is not saleable. Having a defective title can have seriously negative effects on a real estate sale transaction. It could cause the title to be declared invalid, which could cause confusion as to the true owner of the property. For this reason, defective titles are also called a “cloud on a title” or “clouded title,” meaning that it is difficult to “see” who owns the property.

What are Common Title Defects in South Carolina?

The seller does not actually own the property. Unpleasant as it is to imagine, the person you are buying a home from may not, in fact, own the title to that property. Due to the possibility of their ignorance or even willful deception, so-called property owners should not be considered the final word on the buildings and land they occupy. A thorough examination of the wills and estates records should be a mandatory part of any title search. 

Unreleased liens. A land record search will also disclose information about any existing liens or encumbrances affecting the property. A lien is a claim or right in the property typically given or acquired by a party who has lent money to the property owner. Failure to satisfy a lien could lead to your property being foreclosed or forfeited unless you pay off the lien. A title search should disclose any liens against the property that should be satisfied, paid, and released of record before you purchase at settlement.

Judgment liens. When a creditor wins a lawsuit and obtains a judgment for monetary damages, a lien is placed on the debtor’s property. A judgment lien in South Carolina will remain attached to the debtor’s property, even if the property changes hands, for ten years. In South Carolina, a creditor’s ability to collect under a judgment lien will be affected by a number of factors — including a fixed amount of value that will not be touchable if the property is the debtor’s primary residence, also known as a homestead exemption, other liens that may be in place, and any foreclosure or bankruptcy proceedings.

Tax liens. If you owe the IRS or have not paid property taxes, state and federal authorities can place a lien on your building or home.

Mortgages. Mortgages and deeds of trust create liens against real property as collateral for a loan from a lender. While an unreleased mortgage or deed of trust may not be binding on you personally, it is binding on the property you are purchasing and can be foreclosed. It is not uncommon for mortgages or deeds of trust to remain on record even if paid off because the lender did not file and record a release. Again, chasing down the lender or trustee can be a difficult and time-consuming task that should be taken care of before you purchase at settlement.

Missing or misrecorded property information. Missing or erroneous public records complicate matters further because a title search may not discover certain documents affecting the title to the property. Clerical mistakes do happen. Alternatively, property owners sometimes conceal or forge information. Again, title insurance can protect you against these types of title defects.

Illegal deeds. While the chain of title on your property may appear perfectly sound, it is possible that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or one who is reported single but in actuality married. These instances may affect the enforceability of prior deeds, affecting prior (and possibly present) ownership.

Missing heirs. When a person dies, the ownership of his home may fall to his heirs or those named within the will. However, those heirs are sometimes missing or unknown at the time of death. Other times, family members may contest the will for their own property rights.

Forgeries. Sometimes forged or fabricated documents that affect property ownership are filed within public records, obscuring the rightful ownership of the property. Once these forgeries come to light, your rights to your home may be in jeopardy.

Undiscovered encumbrances. At the time of purchase, you may not know that a third party holds a claim to all or part of your property — due to a former mortgage or lien, or non-financial claims, such as restrictions or covenants limiting the use of your property.

Unknown easements. You may own your new home and its surrounding land, but an unknown easement may prohibit you from using it as you would like or could allow government agencies, businesses, or other parties to access all or portions of your property. While usually non-financial issues, easements can still affect your right to enjoy your property.

Boundary/survey disputes. You may have seen several surveys of your property prior to purchasing, however, other surveys may exist that show differing boundaries. Therefore, a neighbor or other party may be able to claim ownership of a portion of your property.

Undiscovered will. When a property owner dies with no apparent will or heir, the state may sell his or her assets, including the home. When you purchase such a home, you assume your rights as the owner. However, even years later, the deceased owner’s will may come to light and your rights to the property may be seriously jeopardized.

False impersonation of the previous owner. Common and similar names can make it possible to falsely “impersonate” a property owner. If you purchase a home that was once sold by a false owner, you can risk losing your legal claim to the property.

How Can I Fix a Defective Title Situation in South Carolina?

If you have discovered a defect in the title to your property, you need to remedy the defect to avoid having your title being declared invalid. Most of the time, this can be accomplished by conducting a title search at your county recorder’s office. This office stores all the records for real estate transactions, and should reveal the true owner of the property in question.

If this does not shed light on the situation, a dispute over a defective title can be resolved by filing a “quiet title” action. This is a lawsuit requesting the court to determine who the valid owner of the property is. During the proceedings, the court will examine all the documents and facts involved to reach a conclusion. To read more about quiet title, please refer to my article entitled, “Suit to Quiet Title in South Carolina.”

Lastly, defects in a title can be avoided by examining the records for the property prior to any transfers. However, even good faith attempts at record searching can overlook defects that are hidden or difficult to identify.

A defective title can make a real estate transfer more complicated and can delay the process. When purchasing real estate it is vital that you obtain a clear title from the seller and properly prepared contracts for purchasing real estate should be contingent on the seller providing you with a good and marketable title at settlement. The Watts Law Firm can ensure that all is well before you purchase a home. Should you have any questions about defective and unmarketable titles or would like to schedule an appointment, contact the Watts Law Firm.