One of the most crucial aspects to check when investing in an asset is clear ownership. This can be done with the help of an unbroken chain of titles. However, many aren’t aware of this document or its significance in avoiding disputes and fraud.
In this guide, we’ll share everything about this document, its importance, and ways to verify it!
What is a Chain of Title?
The chain of title implies the history of ownership of any property, such as real estate, automobiles, and any other assets.
The document contains the chronological sequence of property ownership and transfers. Every transfer is recorded legally in the form of contracts, agreements, or deeds.
In real estate, chain of title includes the names of all previous property owners, and claims or legal actions against it.
Importance of Chain of Title
1. Confirmation of Legal Ownership
The legal owner’s name is present on the chain of title. So, if you plan to buy a property, the document confirms whether you’re dealing with the actual owner.
If there’s no clean chain of title or the chain is broken, there’s a high risk of disputes over the actual property ownership. This can lead to expensive legal conflicts.
2. Prevention of Fraud
The Australian Competition and Consumer Commission’s Scamwatch receives around 2 real estate scam reports weekly.
A continuous and clear chain of title prevents and nullifies fraudulent claims and scams regarding asset ownership.
If such cases arise, proper verification of ownership transfer is a great way to prove the current owner’s legitimacy. Thus, it can resolve the risk of acquiring any asset with doubtful ownership.
Suppose you buy a property from someone. A verified chain of title stands as proof that the seller has all rights to transfer ownership and the buyer receives the legitimate title.
3. Identification of Encumbrances
Chain of title documents also reveal all kinds of encumbrances, including mortgages, easements, and liens. These can later affect the property transferability and even limit its free use and development.
Thus, these encumbrances help you understand all potential liabilities and assess the actual property value.
4. Ensures Marketability
A clear chain of title also makes a property desirable. Buyers are more willing to go ahead with transactions when they have clear documents without any disputes.
5. Offers Legal Protection
If any dispute arises later, a well-documented chain of title works as a buyer’s evidence to defend their ownership rights legally.
6. Proof for Financing
Often, lenders seek evidence of a clear chain of title of the property you want to invest in. They offer loans only once they are certain that the collateral (the property) doesn’t have any encumbrances. This protects the lender’s interests.
How to Verify Chain of Title
1. Get a Title Search
A land title search is the basic step to verify the chain of title. You can get this document on a reputable website where you search for the property using address or title reference number. You pay for the services and they immediately email you the documents.
This has almost all the important information, such as the current owner’s full name, encumbrances, caveat against title, unregistered deals, and registered mortgage.
2. Request Title Abstract
A title abstract has the condensed property ownership history and documents that impact the title. It also highlights potential issues, including easements and liens. Ensure these are addressed when checking the document.
3. Obtain Title Insurance
Title insurance works as an additional protection against defects in the chain of title. In this, insurance companies conduct title searches by themselves. If there’s any issue, the insurance covers the issue resolution costs.
4. Investigate Encumbrances
Check for mortgages, liens, easements, and restrictions on the property. All previous mortgages must be released, and liens must be satisfied.
5. Consult with Professionals
Seek a real estate attorney to help you verify the chain of title from the extracted documents. They can interpret all documents, identify complex issues, and advise ways to address them. They also help in title dispute resolution.
6. Get a Property Survey
The property survey mentions property boundary issues and provides a legal description of title documents. The survey shows all issues, including easements and encroachments, which might later affect the property value or usage.
Ensure that the legal description completely matches the actual property.
Conclusion
The chain of title verification is fundamental in property/asset buying and transferring. So, navigate all asset complications with this document, avoid potential legal problems and enjoy being the rightful property owner!
