What is a title defect or encumbrance?
A title defect occurs when information is missing from a title, such as the existence of a previous owner s undisclosed heir who could then make a claim on the land. An encumbrance is a claim made upon the land by a party other than the landowner. For instance, a local utility company may have an easement for utilities run to a house. When a potential homeowner is borrowing money, the lender will require the title to be cleared of any outstanding defects or encumbrances before the land is transferred and the loan approved.
A title defect is something missing from the title, for example, an undisclosed heir from a previous owner who could claim the land. An encumbrance is a claim made upon the land, but not by the landowner. For instance, your local power company may have an easement for a power line that will serve your house. If you are borrowing money to purchase land, your lender will require your title to be cleared of any outstanding defect or encumbrance, before the land is transferred.
A title defect is a problem or omission associated with the title that impairs your ownership rights to the property. Possible title defects include errors or omissions in the public records, forgery, confusion caused by similar or identical names, signatures of minors, mental incompetence, fraud, incorrect marital status, etc. For example, a title defect could be an undisclosed heir of a previous owner suddenly appearing to make an ownership claim on your land. An encumbrance is a claim made upon the land by someone other than an alleged landowner. For instance, your local power company may have an easement – a limited right to use your property – to install electrical power lines to serve your house or your neighbor’s. While a utility easement is often an appropriate encumbrance, other encumbrances may not be acceptable. If you are borrowing money to purchase your house, your lender will want assurance that no one else has a claim against your house – the collateral for your loan. Th
A title defect is something missing from the title, for example, an undisclosed heir from a previous owner who could make a claim on the land. An encumbrance is any right to or interest in land that affects its value (i.e., outstanding mortgage loans, unpaid taxes, easements, deed restrictions). If you are borrowing money to purchase land, your lender will require your title to be cleared of any outstanding defects or encumbrances before the land is transferred.
