An important part of a real estate transaction is making sure that the title to the property is free and clear, meaning that no questions exist about ownership or liens against the property. Ideally, a title company or real estate lawyer ensures that such questions are identified and resolved before closing, confirming a “clear title” for the buyer. Sometimes, unfortunately, a buyer may discover after closing that the title in fact is not clear, resulting in a “cloud" on the title. Legally, a cloud on title results from an “outstanding claim or encumbrance on a property which affects or impairs the owner’s title.” Tuttle v. Builes, 572 S.W.3d 344, 360 (Tex. App.—Eastland 2019); Ferrara v. Nutt, 555 S.W.3d 227, 239 (Tex. App.—Houston [1st Dist.] 2018). While the title itself establishes ownership, a cloud on the title affects that ownership, causing confusion as to who is the rightful owner of all or part of the property or encumbering the ownership interest. In some cases, the property owner may need to resolve such issues through legal action.
Specific Causes of a Cloud on Title
Many different scenarios may result in a cloud on title, including deeds which are not recorded correctly, other contracts on the property, mistakes in property descriptions, even forgery, to name a few. The document itself, a will for example, may not even be publicly recorded. However, just the claim of its existence is enough to cloud a title. Even if the person disputing the title does not seek full or partial ownership of the property, the title is clouded by the claim itself. Miller v. Miller, 376 S.W.2d 80 (Tex. Civ. App.—San Antonio). Texan Development Co. v. Hodges, 237 S.W.2d 436, 439 (Tex. Civ. App.—Amarillo 1951, no writ).
Property owners do have some recourse, fortunately; they can state that the claim against the property is invalid or unenforceable and file a suit to remove a cloud from the title, also known as an action to quiet title. Vernon v. Perrien, 390 S.W.3d 47, 59 to 60 (Tex. App.—El Paso 2012, pet. denied); Longoria v. Lasater, 292 S.W.3d 156, 165 (Tex. App.—San Antonio 2009, pet. Denied). A suit to quiet title provides an equitable remedy to clear a title of an invalid, unenforceable charge against it. Tex. Prop. Code Ann. §§ 22.001 to 22.004, 22.021 to 22.024, 22.041 to 22.045.
In order to seek quiet title, the plaintiff must plead and prove three elements: the plaintiff’s rightful ownership of the property, a claim or encumbrance which disputes that rightful ownership, thereby questioning the validity of the title, and a statement that the claim or encumbrance is invalid or unenforceable. Heredia v. Zimprich, 559 S.W.3d 223, 229 (Tex. App.—El Paso 2018); Ferrara v. Nutt, 555 S.W.3d 227, 239 (Tex. App.—Houston [1st Dist.] 2018). In order to quiet the title, owners must also prove that the claim is severe enough to negatively impact their ability to enjoy full benefit of the property. While plaintiffs must provide an argument for the strength of their title, they are not required to trace the title to sovereignty. Glenn v. Lucas, 376 S.W.3d 268, 273 (Tex. App.—Texarkana 2012, no pet.); Katz v. Rodriguez, 563 S.W.2d 627, 631 (Tex. Civ. App.—Corpus Christi 1977, writ ref' d n.r.e.).
The defendants must provide proof that their claim is valid or enforceable. Failing to do so, the plaintiff successfully quiets the title, clarifying ownership of the property in question. The plaintiff is not eligible for damages, not even attorney’s fees in most cases. The main goal of the action is simply to clear the title.
For most people, buying property is one of the biggest investments they will make. Even with the work of title companies, transferring ownership is not always problem-free. Securing the advice and help of an attorney trained in real estate law will benefit a client before, during, and after the close of a real estate transaction. Additionally, seasoned real estate litigators should be used to prosecute and defend quiet title actions.
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