Training & Education | What is a title defect?

Recently, I was asked by a consumer what exactly a title defect was and what kind of things a policy won’t cover.

It’s important for everyone in our industry to understand all aspects of title and not just how to cure title.

Below will explain exactly what a title defect is along with some examples of lien issues.

You will also see what a title policy doesn’t cover.

You can also find this information and more in the following link:

https://www.tdi.texas.gov/title/titlemm6.html

If you have any questions, please feel free to email me @ [email protected].

What is a title defect?

A title defect is anything that can cause a title to be considered invalid or defective in some way. Some examples are:

• Invalid documents due to forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation.
• Failure of any person or entity to have authorized a transfer or conveyance.
• A document affecting title that is not properly executed, signed, witnessed, notarized, or delivered.
• Undisclosed or unrecorded easements not otherwise apparent on your land.
• No right of access to and from the land.
• A document executed under a falsified, expired, or otherwise invalid power of attorney.
• A document not properly filed, recorded, or indexed in the public records.
• Ownership claims by undisclosed or missing heirs.
• Defect arising from an improper prior foreclosure.
• Undisclosed restrictive covenants affecting your property.

Lien issues can also cause title defects. Some examples of lien issues are:

• Any statutory or constitutional contractor’s, mechanic’s, or materialman’s lien for labor or materials that began on or before the policy date. Talk to an attorney about your rights.
• Lien for labor or materials furnished by a contractor without your consent.
• A previous owner failed to pay
  • a mortgage or deed of trust
  • a judgment, tax, or special assessment
  • a charge by a homeowners or condominium association.
• Other liens or claims that may exist against your title that are not listed in the policy.

Notify your title company immediately if someone files a lien or claims an interest in your property. Failure to do so could jeopardize your claim. Contact the underwriter listed on the policy and follow their claim-filing procedures.

What doesn’t a title policy cover?

A title policy generally won’t cover mistakes or defects, financial issues, or rights issues.

• Defects that are created after the policy is issued.
• Defects that you create, or of which you had knowledge.
• Problems that arise because of your failure to pay your mortgage, or to obey applicable laws or restrictive covenants that were disclosed to you.
• Certain taxes and assessments.
• Losses resulting from rights claimed by someone else occupying the land. The title company may need to inspect the property. There may be a charge for the inspection.
• Homestead, community property, or survivorship rights of a policyholder’s spouse. Texas homestead laws address the rights of a spouse or survivors of a property owner.
• Claims from other people who may have certain rights if your property is near a body of water or has a river or stream flowing through it.
• Condemned land, unless a condemnation notice appeared in the public record on the policy date or the condemnation occurred before the policy date.
• Violations of building and zoning ordinances and other laws and regulations related to land use, land improvements, land division, and environmental protection.
• Disclosed restrictive covenants limiting how you may use the property. Request copies of restrictions and have your attorney explain them.