Taking ownership of real property and owning a home is one of the most common major life goals. When litigation occurs which challenge or raise defects in title, it can be frustrating and a major impediment to realizing one’s dream of owning real property. If you are a new or prospective property owner, there are important things you need to know about potential title issues and how to handle any litigation regarding defects in title in Arizona.
Potential Defects In Title to Real Property
A title defect means that there is a claim on your title or land that may prevent you from buying or selling the property in question. These defects form a cloud over either the validity of the title or the true ownership of the property. As a property owner, you need to be aware of the potential defects that titles can have so that you can understand what to look out for before engaging in a transaction. Please note, defects in title can occur in many ways, three of which we will discuss.
Defect in Title Due to Public Record Error
Any recorded inaccuracies documented on a title concerning the features of your land will mean that there is a defect in title. These inaccuracies range anywhere from the actual size of the land, where property boundaries lay, or a mistake in the address printed on the title.
Defect in Title Due to Encumbrances
Encumbrances cover a wide range of issues that may affect your ability to buy or sell a piece of property. It covers the different reasons that a third-party may have interest in your land such as an existing mortgage on the property, liens, or even nonfinancial interests, such as easements.
Defect in Title Due to Undiscovered Wills
This occurs where a prior owner confers ownership of his real property onto another in a will that is not discovered until after the property is sold to another. This presents an issue as it gives another party interest in the land and causes a defect in title as there is dispute as to the rightful owner.
To find out whether there is a title defect, you can have a real estate lawyer help you to rule out whether there are any encumbrances, liens, or any other defects that prevent you from buying or selling property. If you have found that there is a defect, then you may need to bring a “Quiet Title action,” which will resolve any clouds on title.
Quiet Title Actions in Arizona
A quiet title action is a lawsuit that is filed for the purpose of determining the ownership of property and establishing free and clear title. In the instance where we discussed the possibility of a mortgage, a quiet title action will determine whether the property belongs to the mortgagor or the current owner. If there is a defect in title due to disputed state boundaries, then the party will be the state of Arizona and papers will be filed against the attorney general.
Any party can bring a quiet title action, whether or not that party is currently in possession of the property. This does mean that any third party can bring a quiet title action against you even if they are not in possession of the property.
If a Quiet title action is successful, it will remove defects to the title. A new title will be made and filed with the County Recorder, which makes the old title and the associated defects no longer valid.
When to Use Quiet Title Litigation to Resolve Defects in Arizona
Although a Quiet Title Action is useful for removing defects from a title, it is important to understand when to employ this option. If the issue can be resolved through both parties agreeing to amend a deed and related documents that give ownership rights, then Quiet Title Litigation is unnecessary.
Quiet Title Litigation After Sending Quit Claim Deed
There are risks that you can incur even if you win a Quiet Title Action. It is best to file this action only after understanding whether parties with potential interests will attempt to claim the property. Bringing an action against a party that elects to disclaim all rights and title to the plaintiff, will result in the plaintiff having to pay for the defendants’ recovery costs pursuant to A.R.S § 12-1103.
In order to avoid this outcome, you can utilize a procedure known as a quiet title action, which gives the defendant the opportunity to relinquish interest in the property.
Pursuant to A.R.S. § 12-1103 (b), the plaintiff can send a letter containing:
- a Quit Claim Deed to the property
- a sum of five dollars
This should be sent twenty days before actioning a Quiet Title lawsuit. The letter should also make the clear demand that the defendants sign and return the Quit Claim Deed. If the Deed is not signed, then the plaintiff will be absolved from any duty to handle the defendant’s costs.
Quiet Title Litigation and Filing a Lis Pendens
It is not always necessary for parties to file a Lis Pendens when bringing a Quiet Title Action. However, if the defendant in the lawsuit has an interest in the land which he could then transfer to a third-party purchaser, it may be in the plaintiff’s best interest to file one.
Filing a Lis Pendens addresses the risk of the third-party purchaser gaining a priority over your claim of the property, as it, in effect, prohibits the ability of the title to be transferred during the proceedings and notifies interested third parties that claim to the title has been disputed by the defendant.
Work with Experienced Arizona Real Estate Attorneys for Defects in Title
The attorneys at M&G Law can assist you with any legal issues related to defects in title in Arizona. Our team of real estate litigation attorneys have decades of experience with resolving common defects in title. Contact us today to schedule an initial consultation at 602-533-2840 or make an appointment online.