National Real Estate Exam (PSI)Transfer of TitleHard
A title search reveals an old, unreleased mortgage lien from a prior owner who claims it was paid off decades ago but never obtained a release. This is best described as:
- AAn encroachment
- BA cloud on title
- CA marketable title
- DAn easement in gross
Show answer & explanationAnswer & explanation
Correct answer: B. A cloud on title
An unreleased lien or other unresolved claim that casts doubt on a property's ownership is called a 'cloud on title.' Such clouds must typically be resolved, often through a quiet title action, before the property can be considered to have marketable title.
Why the other options are wrong
- A. An encroachment involves a physical structure crossing a boundary line, not a lien issue.
- C. Marketable title is a title free of clouds—this is the opposite situation.
- D. An easement in gross is a usage right unrelated to a person, not a lien or title defect.
Cloud on Title
Any document, claim, unreleased lien, or encumbrance that casts doubt on the validity of a property's title, making it unmarketable until resolved.
- Common causes include unreleased mortgages, liens, or errors in prior deeds
- Often resolved through a quiet title lawsuit
- Must typically be cleared before title insurance will be issued without exception
Memory trick: A 'cloud' blocks the sunshine of clear ownership until a quiet title suit clears the sky.