Investing in real estate property is a great way of building wealth, securing a stable asset and diversifying your investment portfolio. However, purchasing a property without conducting due diligence on the title could lead to legal issues in the future if you get a defective title.
Property titles in Pennsylvania, like in many other states, can be subject to various defects that may arise from errors or issues in the chain of ownership, including the following.
1. Liens and encumbrances
If a property has outstanding liens or encumbrances, it means that there are unresolved financial obligations tied to the property. These could include unpaid taxes, mortgages or other debts that the current owner owes. Liens and encumbrances can significantly impact the buyer’s ability to obtain clear ownership of the property, as they can result in creditors making claims against the property even after the sale. It’s essential for buyers to thoroughly investigate any existing liens or encumbrances during the due diligence process to avoid inheriting these financial burdens.
2. Errors in public records
A thorough examination of public records is essential when assessing the title of a property. Errors in public records such as incorrect property descriptions, clerical mistakes or incomplete recordings of transactions, can create significant title defects. These errors may lead to confusion regarding the boundaries of the property or the validity of past transactions, potentially resulting in disputes over ownership rights.
3. Undisclosed easements
If a previous owner granted an easement on the property without disclosing it, it could lead to complications for the new buyer. An easement grants someone else the right to use a portion of the property for a specific purpose such as accessing a neighboring property or installing utility lines. Undisclosed easements can restrict the buyer’s full enjoyment of the property or even prevent certain types of development.
If you’re considering purchasing a property, legal counsel can help address title issues and ensure a smooth transaction.
