What Is a Title?
A title is a concept (and in certain cases, a document) that designates the legal ownership of a property or asset. A title can represent ownership of a real asset such as a car or an intangible property or asset such as a trademark, patent, or copyright. They’re critical in asserting property ownership rights for individuals and businesses.
A title might indicate the ownership of property rights of an individual or business. This would be the ownership of resources, whether they’re tangible (physical in nature) or intangible. Personal and real property titles can differ as well. Title searches are critical in property transactions.
Titles can be obtained by purchase or inherited from an estate.
Key Takeaways
- A title is a document confirming legal ownership of a property or asset, whether tangible or intangible.
- Titles can be obtained through purchase or inheritance and may carry ownership rights burdens, like liens.
- Personal property titles apply to movable items, while real property titles cover land and structures.
- A title search is crucial to reveal any outstanding issues that might hinder the property’s sale.
- Real estate titles come in various forms, including tenancy in common, joint tenancy, and community property.
How Titles Define Ownership in Assets
Three components apply to the concept of a title: ownership, occupation or possession, and the right of possession. While there are various types of titles, two are most commonly obtained: personal property titles and real property titles.
Exploring Titles for Personal Property
Personal property titles give individuals rights of ownership to things that don’t fall under the real property category. They can include all rights or interests in movable things.
Personal property is generally divided into two main categories:
- Corporeal personal property, meaning all property that is tangible or material. This includes items such as automobiles, merchandise, jewelry, and animals.
- Incorporeal personal property, meaning items that are not necessarily material or tangible. This includes items such as copyrights, patents, bonds, and stocks.
Real Property Titles: What You Need to Know
Titles for real property represent ownership of land, houses, and other structures attached to the land. In addition, real property can include water, air, and mineral rights associated with a specific piece of land.
How to Transfer a Title Correctly
Whenever an asset is sold, the title is transferred to the buyer. Property that is sold or traded should be free of liens and other debts or claims before the property is transferred to another party.
In other words, the title should be a clear title. This means the owner has an undisputed claim to the property or asset and they may sell the property to someone else.
If a title isn’t clear, others might claim ownership. Creditors could claim a property if loans are unpaid. For a house, this might mean there are liens, back taxes, or unresolved code violations.
Follow these steps to transfer a title correctly:
- Ensure all liens and debts are cleared on the property.
- Gather necessary legal documents and forms for the transfer.
- Create a bill of sale documenting the transaction details.
- Sign the Certificate of Title to transfer ownership.
- Submit the title transfer paperwork and bill of sale to the appropriate local authority, such as the DMV or land registry office.
Important
A title company should perform a title search to ensure there are no ownership issues that could block a sale.
Different Types of Titles Explained
Real Estate Titles
Real estate titles can take various forms. Primary types include:
- Tenancy in common which involves two or more individuals who jointly hold a real estate title. Tenants in common hold a title, individually, for their respective piece of the property. Each individual can transfer or encumber their title. Ownership can also be willed to another party.
- Tenants by entirety is a title that conveys ownership to a legally married husband and wife, treating the couple as one individual. If one spouse dies, the title is transferred to the living spouse in entirety.
- Joint tenancy, which involves two or more individuals holding a real estate title jointly, where both individuals have equal rights to the property during their lifetime.
- Community property, a form of ownership by a married couple with the intention of owning property together during the marriage. Both spouses have the right to sell or transfer half of the property or will it to another individual. Aside from real estate, all property acquired during the marriage is deemed community property.
- Sole ownership, which is characterized by a legal individual or entity that holds a title. Sole owners are usually single individuals or married ones holding property separately from spouses. Businesses can also hold sole ownership if their structure allows real estate investing in real estate.
Car Titles
Like other property, a car can have a clear or bad title. The type depends on the car’s status:
- Junk title is a title used when a car has been sold to a junk dealer to be destroyed or parted out.
- Reconstructed title is granted by an insurance company for a car that was damaged and has been significantly rebuilt. Cars with a reconstructed title may be driven but must be inspected to ensure their driveability. Insurance companies may impose financial limits on the amount they’ll cover for vehicles with reconstructed titles.
Title Examples in Real-Life Scenarios
Car
John sold his car and must transfer the title to the buyer. John contacts his local Department of Motor Vehicles (DMV) to pay any fees and obtain the necessary forms to transfer the title. John creates a bill of sale showing the sale of the car to the buyer along with the car’s price. John also signs the Certificate of Title over to the buyer to prove that ownership has been transferred.
The title transfer can only occur if there are no liens placed on the property indicating loans or back taxes are owed by John. The buyer takes the title document and the bill of sale to the local DMV and has the car registered. A new title will be issued in the buyer’s name.
Please note that each local DMV may have specific forms, requirements, and fees associated with the buying and selling of a car.
House
An eager buyer has found the house of their dreams and in a rush to close the deal, decides to forego certain things that they originally had wanted, such as greater square footage, a garage, a larger lot, and an inspection. Importantly, the title should not be among the things that they breeze by.
The buyer assumes that the person selling them the house is the rightful owner of the property. They complete the purchase. At some later point, they’re contacted by an heir of the previous owner of the house who claims that the house belongs to them, having been given to them as part of an inheritance.
If that’s proven, then the title wasn’t clear when the house was sold. The buyer may have to give up the property despite having spent a large sum to get it. Their dream house becomes a nightmare.
What Is Title Insurance?
It’s an insurance policy that covers common claims arising from an invalid title and protects you from an unexpected financial burden. Many people purchase title insurance even though they do a title search, just in case an encumbrance isn’t discovered during the search.
What Does Title Mean in Legal Documents?
A legal document such as a deed for a house proves the ownership of real property. It transfers title to the property from seller to buyer. It confirms that no one else can claim to be owner of the property.
Can Someone Sell a House Without a Clean Title?
Yes, that can happen. For instance, a homeowner may try to sell their house without having paid a contractor who worked on it. But, usually, a title search by the buyer or the mortgage company will reveal encumbrances on a title. An invalid title can be a deal breaker for buyers, unless the seller clears up the issues.
The Bottom Line
A title refers to the rights of ownership relating to personal or real property, tangible and intangible. When someone purchases such property, they purchase the title to it, as well. Title can be confirmed by a legal document, such as a deed.
For property of great value, such as a house, it’s vital that the title be proven to be free and clear of encumbrances such as liens placed by service providers, unpaid taxes, or ownership belonging to someone other than the seller. Title can be transferred through sale or inheritance and that clear proof of ownership is essential for a smooth transfer process. Title insurance is a safeguard against potential claims or disputes that weren’t uncovered during a title search.