Perfect Title

What is 'Perfect Title'

Perfect title refers to ownership of a property through a deed free of any liens or defects. This is sometimes referred to as a good, clean or free and clear title.

BREAKING DOWN 'Perfect Title'

Perfect title refers to a state of ownership resulting from a deed unblemished by liens or other defects. Such a deed provides the holder with clear ownership that cannot be challenged by a creditor or other claimant. The deed is in optimal condition for a smooth sale or transfer of property.

It is important to understand the difference between title and deed. Title refers to the rights of ownership of a specific asset, often a unit of real estate. Deed refers to the physical document prepared for a sale or transfer. The deed lists legal details of the property such as exact location and any easements or liens on the property. When preparing to issue a mortgage for the purchase of a property, a title company will thoroughly research the title history of that property. The goal of this research is to uncover any hidden defects that would have to appear on the deed being prepared.

Common Obstacles to Perfect Title

The title search may seem archaic in the age of electronic record keeping, but it safeguards the lender and purchaser against legal problems that could arise and could dramatically threaten the value of a property. Some defects that a thorough search can uncover include:

  • Easements are third-party claims to usage of some portion of a property. This can range from the harmless, such as an obsolete cart path running through a backyard, to a serious problem like a government easement to build a future road through a property.

  • The legality of a former deed can be challenged for a wide variety of reasons. Perhaps it was made by someone not of sound mind, a minor was involved, or a familial relationship was incorrectly listed.

  • Previously unknown heirs to a former deed holder may come forward to make a claim on the property.

  • Creditors to a former deed holder may hold legitimate claims on the property to recover their debts. A common example of this is unpaid property tax.

  • Human error in past deed preparation is the most common defect. This can occur in the public registrar’s office as well in the clerical work of any lender, appraiser, or title company formerly associated with the property.

Once the title has cleared the title search, ideally in perfect form, the title company will produce an opinion letter summarizing its findings.  It will also issue an insurance policy protecting the lender and purchaser against any further unforeseen defects in title.