📋 Types of Title Defects

A title defect is any issue that affects your legal ownership rights to real property. Title defects can prevent you from selling, refinancing, or fully using your property. Under California law, sellers have a duty to convey marketable title, and title insurance companies have contractual obligations to defend and indemnify against covered defects.

Common Title Defects

Title defects can arise from various sources and may not be discovered until years after purchase:

💳 Liens & Encumbrances

Unpaid mortgages, tax liens, mechanic's liens, judgment liens, or HOA liens from prior owners that cloud your title

🗺 Boundary Disputes

Survey errors, fence line disputes, encroachments onto neighboring property, or incorrect legal descriptions

🚪 Easements

Undisclosed utility easements, access easements, or prescriptive easements limiting your property use

📜 Recording Errors

Missing signatures, forged deeds, improper notarization, or breaks in the chain of title

👍 What You Can Recover for Title Defects

  • Cost to cure the defect - Payoff liens, resolve boundary issues, obtain releases
  • Diminished property value - If defect cannot be fully cured
  • Title insurance benefits - Up to policy limits for covered claims
  • Rescission - Undo the sale if seller breached marketable title warranty
  • Attorney fees - For quiet title actions and breach claims

Types of Title Issues Explained

💳 Liens from Previous Owners

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Liens attach to property, not to the person who incurred the debt. If a prior owner had unpaid property taxes, contractor bills, court judgments, or child support, those liens may follow the property to you. Common types include: property tax liens (superior priority), mechanic's liens (from unpaid contractors), judgment liens, federal tax liens, and HOA assessment liens. These must be paid or removed to have clear title.

🗺 Boundary & Survey Issues

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Boundary disputes occur when the physical boundaries don't match the legal description, when neighbors claim ownership of portions of your lot, or when structures encroach across property lines. Common issues include: fences built on wrong property line, driveways or structures encroaching, incorrect legal descriptions in deeds, and adverse possession claims by neighbors who have used part of your property openly for 5+ years.

🚪 Easements & Restrictions

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Easements give others the right to use a portion of your property. Common easements include: utility easements (power lines, sewer), access easements (neighbor's driveway crosses your land), drainage easements, and conservation easements. Some easements are recorded, others arise by prescription (continuous use). CC&Rs (Covenants, Conditions & Restrictions) may limit how you can use or develop your property.

📜 Chain of Title Problems

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Chain of title issues occur when there's a gap or defect in the sequence of recorded deeds. Problems include: forged signatures on prior deeds, missing heir claims (unknown heirs of previous owner), improper probate transfers, fraudulent conveyances, missing spousal signatures, defective trustee deeds, or corporate authority issues. These can result in claims that the seller never had valid title to convey.

🏢 Zoning & Use Restrictions

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While not strictly "title" defects, zoning violations and use restrictions can severely impact property value. Issues include: property zoned differently than represented, non-conforming use violations, building code violations, unpermitted structures, setback violations, and restrictions on intended use. These should have been disclosed by seller under California Civil Code 1102.

⚠ Time Limits Apply

California has a 4-year statute of limitations for breach of contract claims (including breach of warranty of marketable title) under Code of Civil Procedure 337. For fraud claims, you have 3 years from discovery. Title insurance claims must be made promptly after discovering the defect. Do not delay in taking action.

✅ Evidence Checklist

Gather these documents before contacting the seller, title company, or attorney. Click to check off items as you collect them.

📄 Title Documents

  • ✓ Your deed (grant deed or warranty deed)
  • ✓ Preliminary title report from purchase
  • ✓ Title insurance policy (CLTA or ALTA)
  • ✓ Current title search showing the defect

🗺 Survey & Property Records

  • ✓ Property survey (if boundary dispute)
  • ✓ Legal description from deed
  • ✓ Parcel map from county assessor
  • ✓ Recorded easement documents

🔍 Defect Documentation

  • ✓ Lien recording document (if lien issue)
  • ✓ Payoff demand from lienholder
  • ✓ Neighbor's claim letter (if dispute)
  • ✓ Photos of encroachment/boundary issue

📈 Transaction Documents

  • ✓ Purchase agreement and addenda
  • ✓ Transfer Disclosure Statement (TDS)
  • ✓ Closing/settlement statement
  • ✓ All communications with seller/agent

🔒 Get a Current Title Search

If you suspect a title defect, order a current title search or "litigation guarantee" from a title company. This will show all recorded documents affecting your property and help identify the exact nature of the defect. Cost is typically $200-500 and is essential for evaluating your claim.

💰 Calculate Your Damages

Damages for title defects vary based on the type of defect and available remedies. Here are the categories of recovery.

Category Description
Cost to Cure Amount needed to clear the defect - payoff lien, settle boundary dispute, obtain easement release
Diminished Value Reduction in property value if defect cannot be fully cured (e.g., permanent easement)
Title Insurance Benefits Policy coverage up to face amount for covered claims, plus defense costs
Lost Use/Rents If title defect prevented sale, refinance, or rental of property
Rescission Undo entire sale if seller breached warranty of marketable title
Attorney Fees For quiet title actions; may be recoverable from seller per contract

📊 Sample Damages - Undisclosed Lien

Example: Mechanic's Lien from Prior Owner's Contractor

Lien payoff amount $45,000
Accrued interest on lien $4,500
Attorney fees (lien release negotiation) $3,500
Title search/update fees $450
Recording fees for release $75
TOTAL DAMAGES $53,525

📊 Sample Damages - Boundary Encroachment

Example: Neighbor's Structure Encroaches 3 Feet onto Property

Professional survey $1,200
Quiet title action attorney fees $15,000
Court filing and service fees $800
Diminished value (permanent easement) $12,000
TOTAL DAMAGES $29,000

💰 Title Insurance Coverage Priority

If you have title insurance, file a claim with your title insurer first. Most standard policies cover liens, encumbrances, and defects in title. The title company has a duty to defend you against covered claims and pay to cure defects up to policy limits. Even if the defect is excluded, the insurer must explain why in writing.

💡 When Rescission is Available

You may rescind (cancel) the purchase if the seller breached the covenant of marketable title and the defect is substantial. Courts consider: (1) whether the defect existed at closing, (2) whether the seller knew or should have known, (3) whether the defect materially affects value or use, and (4) whether the buyer acted promptly upon discovery.

📝 Sample Language

Use these templates for demand letters to sellers, title companies, or both. Customize the highlighted portions for your situation.

Demand to Seller - Opening
I am writing regarding the property located at [PROPERTY ADDRESS], which I purchased from you on [CLOSING DATE]. Since taking title, I have discovered a serious title defect that you failed to disclose in violation of your disclosure obligations under California Civil Code sections 1102-1102.17 and your implied warranty to deliver marketable title.
Describing the Defect - Lien
Specifically, a title search has revealed a [mechanic's lien / judgment lien / tax lien] recorded against the property on [RECORDING DATE] in the amount of [$AMOUNT], Document No. [RECORDING NUMBER]. This lien arose from [describe origin - e.g., "unpaid contractor work performed during your ownership"]. You failed to disclose this lien on the Transfer Disclosure Statement and failed to clear it at closing. This lien must be paid before I can obtain clear title.
Describing the Defect - Boundary/Encroachment
A professional survey conducted on [DATE] has revealed that [describe encroachment - e.g., "the neighbor's fence/driveway/structure encroaches approximately X feet onto my property" OR "the property's actual boundaries are significantly different from the legal description in the deed"]. This boundary dispute was not disclosed on the Transfer Disclosure Statement. Evidence indicates you were aware of this issue based on [prior survey / neighbor complaints / your own statements].
Describing the Defect - Easement
I have discovered an undisclosed [utility easement / access easement / drainage easement] that significantly affects my use of the property. Specifically, [describe impact - e.g., "a utility easement runs through the portion of the lot where I intended to build an addition" OR "my neighbor has a recorded access easement allowing them to drive across my property"]. This easement was not disclosed on the Transfer Disclosure Statement despite being a matter of public record that you knew or should have known about.
Title Insurance Claim Letter
I am the insured under Title Insurance Policy No. [POLICY NUMBER] issued on [POLICY DATE] for the property at [PROPERTY ADDRESS]. I am hereby making a claim under the policy for the following covered title defect: [describe the defect]. This defect constitutes a [lien or encumbrance / defect in title / lack of right of access / unmarketability of title] as covered under the policy. I request that you investigate this claim, defend my title, and indemnify me for all losses up to the policy limits. Please respond within 15 days confirming coverage and outlining your plan to resolve this matter.
Demand and Deadline
I hereby demand that you [pay $AMOUNT to clear the lien / reimburse me $AMOUNT for costs to cure this defect / pay $AMOUNT representing the diminished value of the property]. This demand is based on your breach of the covenant of marketable title and your failure to disclose known title defects as required by California Civil Code section 1102. Payment must be received within [30 DAYS] of the date of this letter. If I do not receive full payment, I will pursue all available legal remedies, including a lawsuit for breach of contract, fraud, and violation of disclosure statutes, and will seek recovery of my attorney fees as provided in our purchase agreement.

🚀 Next Steps

Your path forward depends on whether you have title insurance and the nature of the defect.

Step 1: File Title Insurance Claim

🛡 Review Your Policy

Check covered risks and exclusions. Standard policies cover liens, encumbrances, and title defects but may exclude boundary issues unless ALTA survey was done.

📩 Submit Written Claim

Send formal claim letter with all documentation. Title company must respond and investigate. Keep copies of everything.

✅ Coverage Decision

If covered, title company will defend and/or pay. If denied, request written explanation and consider appealing or suing.

Step 2: Pursue Seller/Agent Claims

Even with title insurance, you may have claims against the seller and their agent for:

  1. Breach of Warranty of Marketable Title

    Standard purchase contracts require seller to deliver marketable title. Undisclosed defects breach this warranty.

  2. Failure to Disclose (Civil Code 1102)

    Seller must disclose known title issues, boundary disputes, and easements on the TDS.

  3. Fraud/Intentional Concealment

    If seller actively hid or lied about title issues, you may recover punitive damages.

  4. Agent Negligence (Civil Code 2079)

    If agent knew of title issues and failed to disclose, they share liability.

Step 3: Quiet Title Action

A quiet title action may be necessary to:

  • Remove a cloud on title from an old unreleased lien or deed
  • Resolve boundary disputes and establish legal boundaries
  • Defeat adverse possession claims
  • Establish ownership when chain of title is unclear
  • Cancel fraudulent or forged deeds

⚠ Quiet Title Timeline

Quiet title actions typically take 6-18 months and cost $10,000-30,000+ in attorney fees. However, they result in a court judgment establishing your title that cannot be challenged later. If you have title insurance, the insurer may be required to pay for the quiet title action as part of their defense obligation.

Need Legal Help?

Title defects require careful legal analysis. Get a 30-minute strategy call with an attorney to evaluate your title insurance claim, seller liability, and best path forward.

Book Consultation - $125

California Resources

  • CA Dept. of Insurance: insurance.ca.gov - File complaints against title insurers
  • Consumer Hotline: 1-800-927-4357
  • CA Dept. of Real Estate: dre.ca.gov - Agent/broker complaints
  • County Recorder's Office: Search recorded documents affecting your property
  • State Bar Lawyer Referral: calbar.ca.gov - Find a real estate attorney
  • California Land Title Association: clta.org - Title insurance information