What Is a Certificate of Title?

A certificate of title is a state or municipal-issued document that identifies the owner or owners of personal or real property. A certificate of title provides documentary evidence of the right of ownership mainly for real estate.

When issued for real property—such as land or a house—by a title insurance company, the certificate of title is a statement of opinion on the status of the title, based on a thorough examination of specified public records.

Liens and outstanding loans are identified on the certificate of title for a vehicle.

How Certificates of Title Work

Certificates of title can apply to any type of property that has a title, particularly real estate and vehicles. The owner can assume title once their contractual and financial obligations are cleared.

Information on the certificate of title includes the name of the owner and information about the property. For instance, a vehicle's certificate of title will contain the owner's name and address, as well as the vehicle identification number (VIN).

In the world of real estate, the title embodies the right or evidence of the right of ownership of real property. For all involved parties to have an accurate assessment of ownership, public record-keeping is necessary as it provides legal and public notice regarding an entity’s interest in a specific piece of property. This public paper trail allows parties to protect their interests against any third-party claims.

During the sale of a property, the owner must guarantee to the buyer that the title being conveyed is free and clear of anyone else’s claims. A part of that process is demonstrating proof of ownership through means of a certificate of title. The certificate of title, therefore, is a statement of opinion that a title company or attorney believes the property is owned free and clear—based on researching available public records. Public records normally list any encumbrances on the property, such as liens or easements.

Non-Real Estate Certificates of Title

Certificates of title are also issued for vehicles—automobiles, buses, motorcycles, motor homes, trailers and trucks, aircraft, and watercraft, and are often called pink slips. These are issued by a designated state agency to identify the owner of the vehicle in question. Any liens or outstanding loans are identified on the certificate of title.

A lender will often hold the title until the obligation has been satisfied, at which point the lien is released and the certificate of title will be sent to the owner. Take automobile loans, for example. If you purchase a new SUV, and the dealer finances your loan, it will hold the title until you make your last payment. The title is transferred into your name once the loan is paid off completely.

Guarantee of Ownership

A certificate of title is not a guarantee of a free and clear title. There may be unrecorded encumbrances and liens, incorrectly recorded information, or fraudulent activity that are simply unknown. For such reasons, title insurance is purchased to protect the seller from any claims arising from prior or unknown unrecorded or fraudulent activity. Title companies provide certificates of title to lenders that require these documents prior to approving mortgage loans.

Key Takeaways

  • A certificate of title is a state or municipal-issued document identifying the owner of personal or real property. 
  • Certificates of title are often used in real estate and vehicle transactions.
  • The certificate is not a guarantee of a free and clear title. 

Certificate of Title vs. Deed

Both a certificate of title and a deed are written documents that are used to provide proof of ownership. But the two have inherent differences. While the certificate of title is an opinion of status and doesn't guarantee ownership, the deed is a document used when there is a transfer of property from a seller to a buyer. By issuing a deed, the seller transfers the interest to the buyer, also known as the grantor. The deed may also outline detailed information about the property.