What Is a Chain of Title in Real Estate?

If you’re purchasing a piece of property, you’ll want to be clear on who owns the property and whether there are any legal claims to it. Like tax certificates, title documents are extremely important. Therefore, you may come across the term chain of title at some point during the sale process. In this article, we’ll discuss exactly what is a chain of title and how it can be established.

Chain of Title: A Simple Definition

The chain of title report is simply the history of a property’s ownership. When land or a house and land is sold, the title is transferred. Each transfer of ownership forms a part of the chain. When you’re signing the contract to purchase a property, a title company will research the chain of title. However, since all the information should be in the public record, you can also carry out your own search in the county recorder’s office.

The Most Common Chain of Title Documents 

Each state has its own laws regarding how the transfer of property should be recorded. Therefore, the chain of title process may differ from state to state. Still, there are certain documents that are typically involved. Let’s look at some of them.

Transfer Documents

Also known as deeds, transfer documents record the transfer of ownership. They describe the property in detail and convey the real estate from the grantor or seller to the grantee or buyer. 

Financial Documents

Among the documents included in the chain of title search are mortgages and trust deeds. A trust deed or deed of trust is a secured real estate transaction that’s used instead of a mortgage in some states. The lender has title to the property until the debt is paid off.  If there’s more than one lien on the property, the dates determine which receives priority for payment.

Involuntary Lien

Mortgages and trust deeds are voluntary in that the creditor and lender willingly enter into an agreement. In contrast, involuntary liens occur without the owner’s consent, typically as a result of failure to pay debts. Involuntary liens can be due to unpaid local or federal taxes or court orders. There may also be mechanic’s liens on a property if the owner neglected to pay for completed work. Involuntary liens need to be paid before real estate can change hands.

Covenants and Restrictions

These are documents that create restrictions on the use of a property. Maybe the property can only be used for certain purposes or there are limits on the improvements which can be made.

Easements

Rights of way or easements are documents that affect usage rights. They can include:

• Utility easements. These allow utility companies to enter the property for maintenance, repairs, and similar activities.
• Easements by necessity. These permit neighboring landowners to access the land if it is the only way they can reach their own property.
• Private easements. These allow specific individuals to have direct or non-direct access to the property. Private easements may allow a neighbor access to a driveway, well, or sewer line.

What’s a Chain of Title Break?

A broken chain of title occurs if a property’s title transfer was fraudulent or inaccurate. In many cases, it’s due to human error. Mistakes are more likely to happen during property booms when lenders and attorneys are overwhelmed with all the sales taking place. Names may be spelled incorrectly, signatures may be missing, or the property may be described inaccurately.  

When there’s a break in the chain of title, it needs to be corrected. This can be done by going before the court. In some cases, the judge may rule that the break is irrelevant and subsequently nonexistent.  However, sometimes an entity may be required to submit a quitclaim deed which relinquishes any rights they may have had to the property.

This all may sound a little overwhelming and confusing. A lot of people decide to get help with chain of title when completing their real estate transactions. A specialist will help you establish who has the right to sell property, determine whether any entity has a voluntary or involuntary lien on it, and find out if there are any allowances or restrictions you need to be aware of. 

Have Your Title Company Contact CertSimple When You’re Ready to Buy or Sell

As we said before, if searching for a chain of title document seems difficult, it is best to entrust this work to the experts that can carry out the title reports and searches for you. And if your title company needs help getting the documents they need, including title reports, municipal lien searches, property tax certificates, and HOA certificates, have them reach out to CertSimple.

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