What is the term for a situation where ownership of real estate is compromised by liens or unsettled claims?

The appropriate term for a situation where ownership of real estate is compromised by liens or unsettled claims is commonly referred to as a "Cloud on Title." A cloud on title arises when there are unresolved legal issues or claims against the property that could potentially affect the ownership rights of the property. This could include things like unpaid mortgages, judgments, or other liens that have not been cleared, thus causing uncertainty about the ownership.

Understanding the concept of a cloud on title is crucial in real estate transactions, as it highlights the importance of conducting thorough title searches and obtaining title insurance to protect against potential claims. This ensures that buyers and lenders are aware of any potential issues before finalizing a property transaction.

While "bad title" and "title defect" might seem reasonable, they don't specifically capture the broader context of unresolved claims or liens that define a cloud on title. Similarly, "title encumbrance," while related to restrictions or claims against a property, does not fully encompass the nature of unsettled claims in the same way. Therefore, "Cloud on Title" is the most precise term to describe this situation.