Cloud on Title

An apparent claim or encumbrance, such as a lien, that, if true, impairs the right of the owner to transfer his or her property free and clear of the interests of any other party.

The existence of a cloud on title casts doubt upon the ability of an owner of real property to convey marketable title to his or her land, thereby lessening its value. The owner must present evidence to dispel the cloud on title if he or she wants to transfer ownership free of legal uncertainty. One method to remove a cloud on title is the commencement of an action to quiet title.

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cloud on title (cloud) n. an actual or apparent outstanding claim on the title to real property. "Clouds" can include an old mortgage or deed of trust with no recording showing the secured debt was paid off, a failure to properly transfer all interests in the real property (such as mineral rights) to a former owner, a previous deed which was improperly written or signed, an unresolved legal debt or levy by a creditor or a taxing authority, or some other doubtful link in the chain of title. Often the "cloud" can be removed by a quiet title action, by finding a person to create or execute a document to prove a debt had been paid or corrected. Title companies will refuse to insure title to be transferred with a "cloud," or they will insure ownership except for ("insure around") the "cloud." (See: chain of title, quiet title action, mortgage, deed of trust, reconveyance, title, title report)