What is “Quiet Title” and Why Do I Need to Do it?

What is “Quiet Title” and Why Do I Need to Do it?

What is “Quiet Title” and Why Do I Need to Do it?

By | February 29, 2016

Just getting started in investing with real property? Wanting to know more about what Quiet Title is and why you might need to consider it for any property you plan to purchase? There are many reasons that you would want to start a Quiet Title action. You shouldn’t start a new investment purchase until you investigate these advantages. The first thing to understand is exactly what Quiet Title is.

Quiet Title Defined

For new and seasoned investors it is important to consider Quiet Title action as a necessary tool. Quiet Title can be defined as a proceeding to establish an individual’s right to ownership of real property against one or more adverse claimants. Quiet Title is essentially a lawsuit that is filed in order to establish true ownership of a property. This includes land as well as buildings that could be a part of the property. The process of Quiet Title is one that will clear a cloud on the title of a property in order for the property to be sold and/or financed. The action is not one that will simply clear the title of all issues. It must address a particular cloud or issue on the title to the property.

What Situation Might Call for a Quiet Title Action?

When purchasing a property you will want to obtain title insurance. This can be difficult if you are purchasing a property that does not have a clear title or that ownership is unknown in some way. This is often the case when it comes to property that is purchase from an estate after the death of an owner. In some cases the heirs are not all reached and there is little way to prove that they received proper notice of the sale of the estate. In such a case a rightful heir could pop up later and lay claim to the property that you purchased. Similarly, a tax sale purchase could provide you with the same issues.

One of the reasons that a Quiet Title action is important is to clear title of any questions that might cause problems in the future. This could include issues with a mortgage that was never cleared from the title after payoff. There may also be issues with the property if there is a lease currently being held on the property. The Quiet Title is especially useful if the property has been sitting for some time. It will provide Defendants the opportunity to set the record straight and you the chance to ensure the title to the property is clear and ready to go.

A good example of a situation where a Quiet Title action is useful is if an individual passes away before completing the sale of a property. If this individual left all of his or her estate to relatives in a Last Will and Testament, there would be a necessity to ensure nobody is going to contest the passing of the property to the buyer. That is going to prove important if you decide to sell the real estate or do any work for improvement of the real estate. The last thing that you want is to go through the entire process and find out that someone else is claiming to have rights to your investment. Being tied up in court for a long time later in the process can be avoided by taking the time to process through Quiet Title.

Who Can File a Quiet Title Action?

Each state has different laws and regulations concerning Quiet Title actions. Exactly who is able to file one is going to depend on that state’s rules. In many cases the individual filing the action must be in possession of the real property at the time of filing. However, in some states this is not something of concern and anyone with an interest in the property can file the action. And in still other states, the individual filing must be the legal title holder in order to file the action.

If there is a mortgage on the property, some states require the mortgagee (lender) to file the action. This is often due to the fact that many mortgagees hold title to the property until the mortgage is paid off. The law will vary based on who holds the mortgage as well as who is the landowner. Since the burden of proof rests with the Plaintiff, the strength or weakness of the ownership by the respondent is not considered in most cases. It is up to the Plaintiff to show why they should be the sole title holder in full.

What is the Typical Process for a Quiet Title Action?

While the process for Quiet Title is different from state to state, the basic steps are similar. In most cases the filing takes place in a court of law. Each of the potential Defendants must be notified by service. These individuals would include anyone that might have claim to the property such as heirs, prior lenders or anyone that believes they should have some ownership rights. Once service on all of the individuals has been accomplished, they each have 20 days to respond from the date that they are served. If none of the individuals file a response the process will be considered defaulted and in most cases a Motion for Final Judgment after Default will be filed with the court. In a situation where the potential Defendants could not be located service by way of publication can be accomplished. This would require a notice to be filed in a local newspaper for four weeks consecutively.

What is the Cost of a Quiet Title Action?

The cost of a Quiet Title action can vary based on the exact situation. If heirs or Defendants are difficult to track down or if there is a great deal of added documents to be considered, the cost of the action could increase. Publications as well as service fees might change based on the number of potential Defendants. A Plaintiff in such an action could pay anywhere from $300 to $1500 to handle the situation. Working with attorney to complete the action could require a retainer of $1000 to get the ball rolling.

Why is Quiet Title Important in Tax Sale or Foreclosure Purchases?

When investing in property through foreclosure sale or through a tax sale, Quiet Title action is vital. This is perhaps the only way to ensure that the property you are purchasing is truly free and clear for you to do with as you wish. The process of Quiet Title will allow the new owner to seek clearance of title and remove any clouds that might exist from previous owners and financial institutions that might otherwise lay claim to the property at a later date and time. You want a clear title as an investor so that you can obtain financing in the future or sell the property to another buyer. Once you have taken possession of the property and sometimes even before depending on the court rules and regulations in the state, you will be able to file this action.

Quiet Title After Quitclaim Deed Conveyance

In many cases a property can be conveyed to another through the use of a Quitclaim Deed. A quitclaim did is a deed that quickly hands over rights to a property from one individual or entity to another. While a Quitclaim Deed does properly put the rights to the property over to another, it does not address previous or current title issues. This means that there is still an open page in the title history and might allow for others to try to stake claim to the property at a later date. In such a chase, the new owner of the property is best off filing a Quiet Title action. This will ensure that the title to the property is whole and that there are no clouds or hidden problems that might come along. Essentially it allows the court to give complete and utter ownership to the petitioner.

Clearing Title of Errors

The Quiet Title action is not only to remove clouds by unknown heirs to property, but it is also important to help remove possible errors on record. When actions take place on a property documents are recorded at a registry of deeds in order to make the public aware that the action has taken place. These actions can include mortgages securing loans, easements allowing others to have access to the property, removal of an individual from the property deed in a separation or divorce by way of a Quitclaim Deed, amendments making changes to other recorded documents and even liens on the property. In some cases proper removal or cancellation of these documents when changes occur are not properly recorded. In such as case a Quiet Title action will provide the owner with the clean title that is free of any erroneous recorded documents.

Liens on a Property and How They Affect Your Purchase

As an investor you wan to be able to take full possession of the real property in question. This can only happen if you are sure that all liens have been removed from the property. Filing a Quiet Title action can help to relieve you of any liens that could be on the property. A lien is a document that is placed on file to provide a party with a position in the chain with regard to ownership of the property. A lien might be placed on the property if the owner failed to pay taxes, failed to pay a contractor for work done or failed to pay someone that has fixtures or utilities on the property. If a lien has been placed on the property the owner will be unable to transfer the property to another until the lien is cleared. This might require payment to the individual placing the lien.

Risks Associated with Filing a Quiet Title Action

While Quiet Title actions are a valuable part of investing in property, there are still some risks that should be considered when filing the action. In some situations the action can uncover individuals that will want to stake claim to the property. This could lead to a battle to recover the property. The process could be lengthy and expensive, but necessary if you wish to have free title to the property. It is vital that you are prepared to handle this scenario should it make itself clear. Be prepared to face the obstacles that could come about.

In many cases the individuals that have a claim to the property will simply give the property up. This said, in some states the Defendant in the Quiet Title action can recover his or her costs. This means that the Defendant could ask for monetary payment for his or her rights to the property. In some states the court provides options to help reduce the amount of recovery that the Defendant can ask for. States such as Arizona allow for the Plaintiff in the case to send a letter to the Defendant twenty days before the Quiet Title lawsuit is filed (A.R.S § 12-1103). Along with this letter a quit claim deed and an amount of five dollars is included. If during this process the letter is sent and the Defendant doesn’t respond or return the deed executed, the court holds that the Defendant will not be able to recover an award of costs.

What is a Lis Pendens and When Should it Be Utilized?

A Lis Pendens is a notice to all parties that a suit is pending. This could be important if the Defendant in a Quiet Title action is involved with a third party regarding the property in question. If the Defendant was in the process of transferring the property to a third party while the Quiet Title action was in process, the third party could take priority over the Plaintiff as to ownership of the property. Alternatively, if the third party involved obtains and interest in the property after a Lis Pendens has been filed, their interest would be subject to the outcome of the Quiet Title action. This protects you and your interest in the property from the additional party.

Things to Remember When Filing a Quiet Title Action

The process of filing Quiet Title action is different across the country. It is important to remember that the process is time consuming and you won’t see immediate results. A Quiet Title action is essential if you are going to invest in property that you want to transfer at a later time. When purchasing a piece of property through foreclosure or tax sale you will want to start the proceedings for Quiet Title action immediately upon transfer. Since, most states require that you have title to the property prior to filing a Quiet Title action, you will need to wait until the property has transferred to you before beginning the process.

Do I Need an Attorney to File a Quiet Title Action?

There are many aspects of investing that you could and should tackle yourself. The do-it-yourself attitude can provide you with great financial savings and a wide range of learning opportunities when investing. While you could certainly take on filing a Quiet Title action yourself, there are many reasons that hiring an attorney specializing in the task would be beneficial.

An attorney specializing in Quiet Title actions will be familiar with the process and be able to jump right in. He or she will have the skills to know exactly what needs to happen and when in order for you to complete the process properly rendering the property yours free and clear. The right attorney will be familiar with others in the legal community that you might come up against or need the services of. This will make communications go much more smoothly than if you tried to approach the process yourself.

Working with an attorney with experience in filing Quiet Title actions will also mean that he or she understands what could happen to derail the process. The professional can likely see potential pitfalls before they happen and help to redirect the ship to avoid problems when possible. Knowing what documents need to be filed and when can help you to get the job done without errors.

Since the process for Quiet Title can be lengthy, handing the job of monitoring and moving the case along to a professional will free up your time for continued investing and other parts tasks that need to be undertaken. Additionally, you can be sure that the attorney will know what needs to be done in response to any responses from Defendants in the case. Certain documentation must be filed during specific time frames in order for the case to be valid.

Having an attorney handle the Quiet Title action can provide you with the help you need to ensure that your investment is whole. You can entrust one attorney for all of your investments making it easier for you to move your investments along in a clean and concrete manner. Making this a part of the process and considering the attorney as a part of your investment team can streamline the investing process.

Should Quiet Title actions prevent you from investing?

The prospect of having to deal with potential Defendants in a Quiet Title action should not deter investors from making deals. A Quiet Title action may seem like a great deal of work and headache, but it really in the best interest of the investor to follow the process. While it is not required in some states, it is certainly the best way to protect your investment. Additionally, title insurance will not be possible in most locations without first having followed through with a Quiet Title action. That insurance can be vital to maintaining your investment portfolio and keeping your investing going smoothly

In addition, to making sure that you are protecting your investment, you will need to have a clear title if you hope to finance any part of the purchase. Financing the purchase or financing any work to the property once you have taken possession will not be possible without title insurance. Therefore, an investor will need to be sure that they have followed through with Quiet Title action against any adverse parties that may be able to claim some interest in the property at any time in the future. The smartest thing that you can do to protect your purchase as an investor is to simply be prepared to file a Quiet Title action when you start a new venture. Implementing the process and expenses into your purchase and your investment model is going to make it feel simple and go smoothly.

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