Chain of Title
What is a chain of title?
Updated April 11, 2022
A chain of title is the history of a property, listing all the successive owners of a home. This information is revealed through a real estate records search, and specifies who built a home, who first owned it, and who subsequently owned the home, as well as each owner’s period of ownership.
The chain of title, which tells you the ownership history of a home and whether there are any liens on the home, is important for buying as well as selling a home. Credit: Tierra Mallorca/Unsplash
Note that a title is a legal document and a bundle of rights that outline the ownership of a property. A title means that the owner has the right to possession, control, exclusion, enjoyment and disposition of the property, as well as the ability to sell it. Other valuable assets, like boats, cars, and jewelry may have titles to demonstrate ownership as well.
When a property is sold, its title is transferred from the seller to the buyer.
When a buyer purchases a home, a title company will do a search for the chain of title, drawing upon documents like deeds, foreclosures, and death certificates. Once the chain of title is found, the title company will share a report summarizing its findings.
Why is a chain of title important?
A chain of title clearly establishes ownership of a property; if a title is not transferred properly from buyer to seller, the homeowner can run into major problems in the future selling the home. It will also reveal if there are any encumbrances on the property—that is, claims against the home by someone other than the owner, or a mortgage recorded against the home.
A chain of title could also reveal liens against the property. Tax liens or judgment liens would mean that a previous owner failed to pay property taxes, or did not pay a contractor for work done on the home, respectively. A mortgage lien indicates that a previous owner still owes money on the mortgage for the property.
There could also be other errors in the chain of title, like improper title registration or an issue with the recording of the deed to the home. Small mistakes, too, like the misspelling of a previous owner’s name, can lead to potential complications. A buyer may not want to (or be able to) go forward with the deal, or a lender may refuse to issue a mortgage, until such issues are resolved.
Disputes or errors on chains of title can be addressed with the help of a real estate attorney. Sometimes the resolution is as simple as requesting a corrective deed for problems like a misspelled name.
These possible complications are also why home buyers purchase title insurance, which takes effect at the close of a sale and protects lenders and home buyers from financial loss associated with defects in the title to a property. Should any unexpected claims against the home arise after the deal is closed, title insurance will protect the new owner.