What is referred to as a claim or encumbrance on a property title?

A claim or encumbrance on a property title is referred to as a "cloud on title." This term describes any issue or irregularity with the title that affects the property's ownership or may prevent it from being sold or transferred without ambiguity. A cloud on title can arise from various sources, such as unpaid taxes, outstanding liens, or disputes regarding property boundaries. Such claims create uncertainty and potentially make it more challenging for the current owner to market the property or secure financing against it.

Understanding the nature of a cloud on title is crucial for both buyers and sellers in real estate transactions. Title searches are essential to identify any clouds on the title before a transaction is finalized, ensuring that all parties are aware of existing claims or encumbrances that need to be resolved.

In contrast, title insurance protects buyers and lenders from financial loss due to defects in the title that were not known at the time of the transaction. Property liens specifically refer to a legal claim against a property for unpaid debts, while easements are rights granted to a person or entity to use a portion of another person's property for a specified purpose. Each of these concepts is related to property ownership but does not encapsulate the broader implications of having a "cloud on title."