Definition of 'Bad Title'
A title that does not grant ownership to its holder due to unsatisfied legal or financial problems. A bad title is most often associated with real estate. Having a bad title can prevent the titleholder from selling the asset.
Investopedia explains 'Bad Title'
A bad title may exist for a variety of reasons. In the case of real estate, the title may have a lien associated with it, may have back taxes owed or may have failed to correct a building violation. Any problems associated with the title must be resolved before the titleholder can legally transfer the title to another party. If a bad title is transferred, the receiving party does not legally own the property.
Real estate investors should make sure that a property does not have a bad title before proceeding with any purchase. Homes in foreclosure, for example, may have a number of outstanding issues. Buyers may consider purchasing owner’s title insurance to protect themselves against unforeseen claims against the title.