
Defective Title
The term defective title refers to an impaired title on an asset or a piece of property. Other issues that may defect or cloud a title include: inconsistencies between the wording of the title and local real estate standards misworded title document that makes the true identity of the property unclear missing signatures of a spouse or other co-owner A defective title is considered unmarketable. A property owner who tries to sell an asset with a defective title may be liable for any damages or may lose the title altogether. The term defective title refers to an impaired title on an asset or a piece of property. In order to find a remedy to a defective title, a title search can be performed to determine the identity of the true owner.

What Is a Defective Title?
The term defective title refers to an impaired title on an asset or a piece of property. The defect or impairment on a title can be in the form of a lien, mortgage, or judgment. Because other parties can lay claim to the property or asset, the title cannot be legally transferred to someone else. Defective titles are also called bad titles.




Understanding Defective Titles
A title is a legal document that shows ownership of a tangible asset or other property such as a vehicle or a piece of real estate. Titles also show ownership of intangible assets such as trademarks. Having a clear title is necessary if the owner of the property wants to sell it. But a title is considered defective when there's some type of black mark recorded against it.
Title defects may come in the form of liens, mortgages, or judgments. Defective titles may also include other claims such as when a third party tries to establish an estate right title or interest in opposition to the owner’s claim to the property. The title may also be defective if proper procedures for filing real estate documents are not followed. Other issues that may defect or cloud a title include:
A defective title is considered unmarketable. This means the property — and therefore, its title — can't be legally transferred or sold to another party because of the defect. If the titleholder wants to be able to do anything with the asset, they must first take care of any and all encumbrances. This can happen with any type of title, including quitclaim titles — a deed that transfers ownership of an asset even when it's not sold. For example, a homeowner cannot sell a home if there is an outstanding tax lien on the property. They would have to take care of the outstanding taxes to remove the lien in order to go through with the sale. If the titleholder decides to sell an asset with a defective title, the seller may be held liable for any damages as a result. The seller may also lose all rights to the title itself.
In order to find a remedy to a defective title, a title search can be performed to determine the identity of the true owner. If that isn't sufficient or proves to be ineffective, the property holder can pursue legal action. This is called a quiet title. This action puts the decision of determining who the true titleholder is in the hands of the court.
It's important to conduct a title search to determine the true identity of the owner of a defective title.
Special Considerations
A missing deed or one that was destroyed may be a contributing factor in rendering a title defective. The deed may also be inaccurate or insufficient in its description of the property. There may also be stipulations that can affect ownership of the property such as a piece of property that's under an estate contract. There may be issues with the title not being an absolute title. Rather, it may be a registered possessory lien, which refers to land ownership without the deed, or a qualified title, which means there are defects in the title that include legal restrictions.
Related terms:
Cloud on Title
A cloud on title is any document or encumbrance that might invalidate a title to real property or make the title doubtful. read more
Deed
A deed is a signed legal document that transfers the title of an asset to a new holder, granting them the privilege of ownership. read more
Encumbrance
An encumbrance is a claim against a property, often impacting its transferability or restricting its use, by a party that is not the owner. read more
Federal Housing Administration (FHA) Loan
A Federal Housing Administration (FHA) loan is a mortgage insured by the FHA that is designed for home borrowers. read more
Grant Deed
A grant deed is a legal document used to transfer ownership of real property. read more
Intangible Asset & Example
An intangible asset is an asset that is not physical in nature and can be classified as either indefinite or definite. read more
Judgment
Judgment is a court decision that adjudicates a dispute between two parties by determining the rights and obligations of each party. read more
Lien
A lien is the legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract. read more
Mortgage
A mortgage is a loan typically used to buy a home or other piece of real estate for which that property then serves as collateral. read more
Possessory Lien
If a creditor does not receive payment as scheduled, they might hold the physical property of a debtor under terms of a possessory lien. read more