Looks can be deceiving.
This is the case when one has “color of title.”
In this article, we’ll delve into the specifics and understand the meaning behind color of title, legal concepts, and how color of title can be resolved in accordance with the law.
Also, surprise, this will be on your real estate exam.
What Is Color of Title?
Color of Title is a phrase used to describe a claim that has the appearance, prerequisites, and characteristics of a title but due to some defect, it is deemed defective and invalid.
In property law, failure to establish legal possession claims to a real estate property would pass off as having a color of title.
Color of title is used when a person is found having a claim which resembles a title; however, it only passes the color of a title and does not hold the effect and implications of a real one.
This is why color of title is also known as “apparent title” since the papers give off an appearance of a valid title but in reality, it is defective and null.
Scenarios Where Color of Title can Occur
Listed below are some examples where Color of Title may come up when dealing with real estate matters.
Scenario 1: “Person A” buys a parcel of land and assumes they are in possession of a valid title after the transaction.
After a while, the seller or “Person A” finds out about a defect in the papers – the seller did not, in reality, hold a valid title. Following the law, the claim will be passed on as having color of title and neither have legal claims.
Scenario 2: Two or multiple people bought the same real estate. Although each one holds a paper or proof that they own the property, each deed is null and does not hold a valid claim to the real property.
Scenario 3: A deed or a written contract stipulating ownership was forged, deemed incomplete, or was inappropriately delivered and accepted. These are enough grounds that can invalidate the claim and make the documents questionable.
Scenario 4: Assuming that a claim to a particular real estate was legally obtained, both parties were oblivious to an error in the deed or supporting documents.
Both parties are under the impression that the title is valid. However, due to the incorrect terms contained in the written documents that support the title, the buyer only possesses Color of Title.
Real estate law would require the buyer to submit a form containing the corrections needed on the paperwork. The buyer would need to submit this to the county recorder of deeds or to the state registry office where the property is located before the validity of the title and the deed would be restored.
We’ll look into the specifics of another rather common instance where Color of Title can stem from – Adverse Possession.
What Is Adverse Possession?
Color of Title usually comes up when an individual goes through the process of legally claiming a piece of land through adverse possession.
The definition of adverse possession refers to the legal principle in which an individual who has no prior legal rights, title, or possession claims to a real estate property, establishes ownership by simply occupying it.
In dealing with adverse possession, it is important to note the difference between these two concepts: possession and title.
The latter indicates true ownership and right to a parcel of land whereas the former does not.
Following this definition, an individual who acquires a property through adverse possession only has complete physical control of the real estate but will not have the legal title and rights to it.
Moreover, in adverse possession, an individual may acquire it even without paying for it or going through the necessary paperwork and real estate procedures.
However, a lot of procedures and hearings are required before one can obtain the rightful claims to a real estate. The process and requirements would differ depending on the place or state where it is situated.
How to Establish Adverse Possession
The issue of having color of title can arise when the adverse possessor tries to dispose of the real property by selling it.
This individual will not be able to prove he has the right to the property as he/she does not hold an actual title.
Another instance where color of title is brought up is when the individual who holds the right to the property wants to claim it back and is experiencing difficulty in evicting the current occupants.
The sound option is to bring them to court and seek for help in ejecting them from the land.
In order for an adverse possessor to obtain a legal title to the property, government law requires the concerned person to file an action to quiet title in the local court.
A quiet title refers to the lawsuit filed by a plaintiff which would establish a clear title to silence or “quiet” any other claims to the property.
What Is the Use of Color of Title?
A person having color of title may not be at a total loss; this can be used to an advantage in court.
As required by law, one would need to present evidence when filing a claim of title. Color of title usually comes in a paper to support a claim. Thus, attorneys may use this as proof to claim that the buyer worked earnestly and in good faith to acquire a rightful title to the property.
Why Is It Important to Settle Color of Title?
Needless to say, it is a need to follow the law and resolve claims to a property, even if one is found having a colorable title.
The main reason is that a proper and legal title gives the owner rights and liabilities.
For instance, it would be useless to pay taxes for properties that one does not legally possess. Another example would be when one applies and files the property to an insurance company.
Issuance of a title insurance against theft, loss, or damage would need proof of a valid title.
Moreover, establishing proper ownership and title would be critical when it comes to selling or transferring the ownership to another person.
Having a color of title issue would make it difficult for someone to sell the property – it could also be against the law. This may also affect the buyer and could cause a lot of problems.
For example, the buyer pays for the parcel of land, builds on the property, then later on, the real owner takes it away from him/her.
The only thing more important than a written document or deed to a property is the validity of the title.
If there are uncertainties to the title validity of a property, it would be best to book an appointment with a real estate attorney to ask for advice regarding this issue. It will be helpful to know the government or state laws, as well as the process necessary to settle and establish a valid title.
Before paying the taxes or proceeding with a purchase, it’s good to make sure that the title is real and won’t fade away.