Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Quiet Title

What it is:

Quiet title is the name of a legal action intended to ensure that the owner of a property is in fact the real owner and that the property has no other ownership claims on it. To do this is known as quieting the title.

How it works (Example):

For example, let's say that Company XYZ is a company that flips houses, meaning they buy them, fix them up, and sell them for a profit. Often, the houses that Company XYZ buys have been in foreclosure or are owned by people who are in dire financial straits. Often, they have liens against the house as a result of back taxes, for example, or unpaid debts to creditors.

Accordingly, when Company XYZ buys a house, it brings a quiet title action by asking a court to rule that Company XYZ's title is superior to any other claims on the title to the property. Often the action is published in the local paper or other publication to ensure that all parties have a chance to come forward and to allow the court to say that Company XYZ's ownership claims are superior to claims from all other known and unknown parties. This solves any issues with the title once and for all, ensuring that Company XYZ owns the house free and clear before it invests money in renovations.

Why it Matters:

In order to obtain title insurance and ensure that a buyer owns a new property outright, many buyers bring quiet title actions. In many cases, one party will bring the case to bring a resolution to existing claims on a property. In some states, you don't need legal title to file a quiet title action; you only need a "sufficient interest" in the property (i.e., a mortgage, a receipt under a will, etc.)