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Cloud on title

The term cloud on title refers to any irregularity in the chain of title of property (usually real property) that would give a reasonable person pause before accepting a conveyance of title. A cloud on title reduces the value and marketability of property because any prospective buyer aware of the cloud will know that they are buying the risk the grantor may not be able to convey good title. Often, the discovery of a cloud on title will provide the grantee a reason to back out of a contract for the sale of real property.

Examples of clouds on title include a property's address being misspelled in a deed conveying title, a mortgage lien whose repayment hasn't been officially recorded, a deed which has been signed but hasn't been properly recorded, an easement that has not been properly recorded, unpaid property taxes, a failure to transfer property rights (such as mineral rights) to a former owner of the property, and a pending lawsuit before a court of law over ownership to the property. A cloud on title is generally considered synonymous with a title defect.

The usual remedy for a cloud on title is to file a civil action to quiet title.

According to Investopedia: "Any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful. Clouds on title are usually discovered during a title search." [1]

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