Problems with Title in Real Estate
Even though you may have bought a house, and paid off the mortgage, you may not necessarily have clear title to your property. Some of the “clouds” or “exceptions” to your title can include:
- Past ownership claims: Sometimes, when a particular piece of land has been in the family for generations, the original owner can be forgotten. Or perhaps, someone took the land through adverse possession and there never was a clear land grant at the beginning. In these instances, someone from the past could come back to claim an ownership interest.
- Liens: Liens are like mini-mortgages placed on the property to force the property owner to pay a debt. Any liens on the property must be paid before the land can be sold.
- Covenants of record: These are promises that the original land owner made to someone else. For example, the owner could have promised his neighbor that the neighbor will always be able to drive an ATV across the property. This promise was then written into each title, every time the house was sold.
Buyer’s Protections against Title Defects
Fortunately, there are several things you can do when buying a home to minimize any problems from a defective title. The first is to perform a title search, which most real estate legal professionals would be happy to do. A title search will discover many of these defects before you buy a house, so that you know what you’re getting into.
The second is to write a contingency into your home purchase agreement that states that if the current owner cannot prove that they have clear title, then you can back out of the agreement at no additional cost. That way, you’re not obligated to buy anything with a defective title.
Finally, if you discover that there is a problem with your title after you purchase the house, one option is to buy title insurance.
For more information on buying or selling homes, check out FindLaw’s Real Estate section, including this handy Glossary of terms click here
Sole Ownership
In this form of ownership, there is only one person holding title. As a sole owner, the property owner would have sole decision making power with respect to the property. When the sole owner dies, the property would be distributed according to the sole owner’s will. If the sole owner does not have a will, then the property will be distributed according to the rules of intestacy. In general terms, this means the property will be distributed to the sole owner’s next of kin at the time he or she dies.
If the sole owner is a legally married spouse, not a common law spouse, there are family law obligations that should be considered. It does not matter whether the sole owner was married at the time the property was purchased or the sole owner later married. Family law legislation in Ontario for example, limits a married sole owner’s ability to unilaterally mortgage or transfer the property if it is considered to be a matrimonial home. If this situation applies to you, you may need to seek professional advice before attempting to transfer a matrimonial home.
Co-Ownership
Property may also be held by more than one owner. The two most common types of co-ownership are joint tenancy and tenancy in common. The rights and responsibilities of the co-owners will differ depending on the type of co-ownership, set out below. Homebuyers considering taking title as co-owners may also want to enter into a separate agreement setting out the specific rights and responsibilities of the co-owners as it relates to their specific circumstances.
Joint Tenancy
In this form of co-ownership, two or more individuals hold property together and are known as joint tenants. Each joint tenant has an equal interest in the property and equal obligation to maintain the property. Joint tenants cannot transfer the property without the consent of the other joint tenant(s). If one or more joint tenants want to transfer the property and one or more of the joint tenants do not, an application may be made to the court to attempt to force the sale of the property.
When a joint tenant dies, the remaining joint tenant(s) receive the deceased joint tenant’s share of the property by the right of survivorship. Property that is held in joint tenancy is not subject to disposition by will.
Tenancy in Common
In this form of co-ownership, two or more individuals hold title to the property in shares that may or may not be equal. The percentage of ownership of each tenant in common should be set out in the deed. Each tenant in common holds a share of the property and is only entitled to receive the income from the property in proportion to his or her share. Each tenant in common is also required to contribute to his or her share of the expenses in proportion to his or her ownership interest in the property.
Tenants in common are able to transfer their shares in the property without the consent of the other tenants in common. There is also no right of survivor-ship for tenants in common. When a tenant in common dies, his or her share in the property would pass by the deceased’s will or by the rules of intestacy (if there is no will)