A cloud on title is a claim or encumbrance that affects the ownership of a property. These claims or encumbrances can arise from easements or mortgages on the land. They can also arise from a defect in a deed or a lien that may yield title to a third party such as mechanic’s liens. Typically, these claims can be discovered through a title search. For example, a title search could discover a mechanic’s lien. Mechanic’s liens are typically placed on the property when there is an issue involving payment for construction. Because the mechanic’s lien remains with the property, the lien creates a cloud on the title, discouraging potential buyers from purchasing the property. A cloud on title may be lifted by a quiet title action.
These claims or encumbrances do not need to be valid in order to create a cloud on the title. Rather, these claims only needs to be a colorable claim.
[Last updated in June of 2020 by the Wex Definitions Team]