What is an action to quiet title and how can a real estate investor file one?

Here’s the question:

“What is a suit to quiet title and how do I file one if I need to?”

So what exactly is an action to quiet title or (also called) a suit to quiet title?  That’s what we are going to answer here today, and we’re going to cover a lot more too.

(BigReia Trivia: In 1836 which country was the first to recognize Mexico’s independence?  Answers always below in the comic.)

For real estate investors this is basically a lawsuit that is filed to determine the ownership of a property.  In general an action to quiet title can be referring to the “title” of any real property, so the ownership title in question could be related to a car, a boat, shares of stock, etc.

What does the “Quiet Title” part mean?

You are silencing or “quieting” anybody and everybody who has a claim to the title to the property.  Anybody who has a claim on the title or thinks the owner owes them any money will show up in court and make their case.  

When the dust settles all, whatever the court decides is (usually) final and no further claims can be made against the title or the property.  Think of an action to quit title as a death match of liens, there can be only survivor.

How might an action to quiet title dispute come about?

An action to quiet title or a suit to quiet title can come about in a variety of ways, usually it is because:

1.) There is a (potentially) clouded title.

This means the title is not “clean” and there are liens on the property.  This means that somebody thinks the property owner owes them money and they have put a debt claim on the title.  Remember that in order to sell a property you must have clear/clean title so a clouded title must be resolved.

What’s this talk of a potentially clouded title?  Well let’s say you buy the property at a tax auction or something like that, once the redemption period for the previous owner is over (see the class on this) then a title company will usually want you to take an action to quiet title.  This way you can make sure no surprise claims will come forward and it the title company will feel better about insuring the title.

2.) The ownership of a property is in dispute.

When it is unclear who has the legal right of ownership to a property, a suit to quiet title will clear this up.  Think of the death match scenario, there can be only one winner.  Usually at least.

3.) A situation such as a broken chain of title.

This happens a lot more overseas although we have seen it in America too.

The best way to explain this is to get into an example…

Let’s say that 50 years ago Larry inherited a small family farm from his dad.  Upon inheriting it, Larry sold it to another farmer.  That farmer passed and now his children are going to sell the property to a Jim, another farmer.

However, upon searching the title they discover that 50 years ago Larry was never on the title.  Larry had no real way to “sell” the farm because he never legally owned it.  So now there is a broken chain of title.  

What happens next?

Jim, the purchasing farmer, would need to do an action to quiet title and take the findings to court where he would ask the judge to declare him as owner and put his name on the title as purchaser.  By the judge’s ruling it would form a ‘link’ to replace the broken chain of title.

The official resolve:

This ‘link’ is recorded as public record and future title searches will reveal this as a resolved matter, and it would be upheld legally as a linked chain of title.  The chain of title MUST be resolved in order to sell or refinance a property since title insurance is need to do just about anything with a property.

The process:

Once a defective title is discovered, the pursuer of the title (the one desiring to purchase) will petition the court with the defective title and show the court the defects.  In most cases this is a matter of land dispute and not personal conflicts between personal parties.

In cases where it is a matter of conflict between personal parties, there will be a civil suit to determine who is legal owner.  Either the defendants or the plaintiffs will be declared with the winners.

In matters of broken chains of title:

Simply clarifying ownership by producing tax records, and providing the background of the property should clear things up for the court. Such as in our example, tax records showing that the original purchasing farmer from Larry paid the taxes for the following 50 years and farmed the land.

In other cases, like personal ownership disputes (say that of a divorcing couple) each party will most likely need to retain professional legal counsel and proceed forward with a civil suit.

Chain of Title is kind of a big deal.

Any time a piece of real estate moves from owner to another, a new link in the chain of title is created.  There are many laws and regulations about exactly how to do this and the requirements for a new link to be created.  The point of all this is so that at any time the owner of a property can be a clearly established.

To do just about anything with a property you will need title insurance.  If you want to sell, refinance, owner finance, etc. you or the buyer will need some form of title insurance.  If there is ANY question or weirdness regarding the chain of title then title companies will not issue title insurance.

So to answer the question:

Action on a quiet title suit will entail contacting your local courthouse, or the local courthouse of the county in which the property resides, and filing suit to appeal your case to the court for an official court ruling. 

You will need to file the proper paperwork, and have supporting evidence (such as the title search) ready when you file. Upon finding there is just cause for action on quiet title on your part as an investor, your first step will be to make contact with the courts, as each state is different, and find how to file suit, to clear up the title.

Also remember that if you DO ever owe anybody money once you pay them off make sure they sign off that you actually did pay.

You would have to qualify for it, you can look into fee-shifting for more on this, it is also talked about here as well.

Can I file an action to quiet title myself?

Yes, but man… don’t do it.

Between the options of “I don’t fu** which you” or “Hail Yeah Dawg” this is DEFINITELY a:

“I don’t fu** which you.”

Technically there MAY be a situation where it may make sense for you to do some minor research and if you have a GREAT relationship with a title maybe they will help you submit the paperwork correctly.  In general even if you get all the documentation if you miss so much as a single word or one syllable from a legal description then your entire claim may be denied.

That’s why it is better to use an attorney that your title company suggests so that they will conform to all the guidelines and requirements necessary to get title insurance.

How long does a suit to quiet title take to complete or finish?

The exact time will vary but a good time range is about 90 days or so.

What if you have several corrupt areas or multiple liens on a property’s title?  In other words what if there are multiple defects on the title?  How long will it take then?  90 days for each one?

Not usually.  This is why working with a title company can be so helpful because if ONE defect occurred several years ago then it is possible that any activity since then is suspect or defect.  So several issues may be solved when the core defect is resolved.  That’s why you usually want to deal with the oldest break in the title chain.

What if there are multiple claims on the title?

This may happen and in situations like this you want to do your homework before you close so that you know about how much time and money it will take to deal with each claim.  You will want to have a LOT of paperwork to prove your case that all these other lien claims are totally false or were already settled and dealt with. 

If I win the action to quiet title, will the losers pay me attorney fees?

Yes it is possible that if you win in court the other party will have to pay your legal fees, but it is unlikely.  For more on this you can look more into what is called fee-shifting here, or the legal dictionary listing here, basically this means that if the court rules in your favor it is possible to get the “loser” to pay all or a portion of your legal costs.

For each state the requirements for meeting the fee-shifting criteria will be different, but you should almost always stay away from doing this for a few reasons.  I won’t get into all of it right now but for starters any time you have the cost of going to court to factor into your investment, you should think twice because the legal fees could easily be more than the cost AND the profit of the underlying property.

How much does a suit to quiet title cost to file?

We recommend you hire an attorney and get a solid quote from them up front about the cost.  We have seen this done for as little as a few hundred dollars, but usually it is a few thousand dollars.  Sometimes tens of thousands.  

A suit to quiet title will usually range from $1,000 – $3,000

The cost will depend on a few main factors, first is your relationship with the title company.  The better they know you and the more they know your history of closing with them, the better treatment you will get.  On top of that here are two main considerations when it comes to the cost:

What will determine the cost of an action to quiet title?

First, how many defects in the title chain are there?

The less, the better.  This can be misleading however, let’s say there was one minor defect in the title that was decades old for example.  All title activity since then would be questionable and would be a defect of it’s very own.  So this may show has multiple defects but it really one one.

Either way, the more digging around that is required the more it will cost.

Second, are they any disputes?  How many?

The less parties that dispute you and your claim, the better.  If it is a family of 10 and each one claims that THEY are the rightful owner and they are willing to fight in court with the other nine, the costs are going to add up.

Those are the main two factors that determine that will determine the cost of the suit to quiet title; the number of defects in the title chain and the number of disputes.

What is the process?  How do I file an action to quiet title?

Remember that even though you CAN do this yourself, BigReia.com does NOT suggest that and instead you should follow these steps with any and ALL situations like this.  Although you can just go to your local county clerk’s office and get the Petition to Quiet Title, it is much better to go through your title company.

There is an article on wikihow about filing your own quiet title here.  They leave out a lot but it is an overview that may be helpful to look at so you know what to avoid.  Remember nothing really matters until a title company agrees and is willing to insure the title.

Step One: Get Your Title Company to List ALL Title Defects

Remember that the ONLY reason you are going through all this and filing a lawsuit to quiet the title and get a clean title is so that you can get a title company to issue an insurance policy on the title.  This is another reason why you should NOT do this yourself because your opinion does not matter, the insurance policy being issued relies on your title company’s opinion NOT yours.

So start with them first.  Yes you can look at the abstract title or court records and get an overview of potential situations, but instead get a full title search done by your title company and have them tell you exactly what they want to see resolved.

Step Two:  Hire the Title Company’s Attorneys to File the Action to Quiet Title

Every title company has at least one attorney on their staff, usually they have more than one.  You want to get that SAME title company’s attorneys to work on your case.  They may not be available or depending on certain statues their attorneys may not be allowed to do this for you, in which case get a solid recommendation from the title company and go with their referral.

Why is it so important to get one of “their” attorneys? 

Filing a suit to quiet title is not an overnight process and if you miss even the smallest thing then a title company may reject the claims and refuse to insure the title.  This often means that you would have to start over and go through the entire process all over again.

What exactly will the attorneys do in an action to quiet title?

This process will vary slightly from state to state but usually it involves the filing of petitions, public notices, formal announcements, multiple public court hearings, etc.  That’s just part of the required process if you have NO disputing parties to fight against or “quiet”, if there are any bumps in the road it usually means a lot more time and money.

Step Three: Get Your Title Policy

Remember do NOT stop or settle until the title company is satisfied and they issue a title insurance policy.  Sometimes an attorney may tell you the job is done and provide what is considered to be a “clean” title, but that is not how you define success.  The problem is that the there may be a lingering issue that bugs the title company.  So remember, the job isn’t completed until you get your title insurance.

Some other helpful places:

There is a detailed breakdown of quiet title actions in this .pdf article here, we don’t know the law firm but the info seems on point.

Here is an attorney, Ryan Jones, who is really passionate about quiet title matters lol.  We don’t know him either but he has helpful material on this site here.

There is another article on wiki how about establishing a clear title for your property, this was written by the same author on the wiki article for filing a quiet title.  His name is Clinton Sandvick and apparently he was affiliated with Oregon University at some point and was a civil litigator.  The info is good and useful, but just apply what we talk about and make sure your legal team is on the case.  

Whenever somebody is giving advice on real estate you always want to check their background because as investors what we look for is often very different than what others look for.  The way you spend your time will determine how far you go in your business and in your life.  Invest it wisely.

When the smoke clears, you want to be standing on of a mountain of human skulls.

Many times you will not have a big “fight” on your hands, but if you then you need to know the process inside and out and have enough money coming from the deal that IF you end up paying for the fight (there are many ways that you don’t have to pay any of the costs out of your pocket, as Azam covers in the class below) that you make an excellent return.

Here’s a helpful breakdown: 

Like I said…

When the smoke clears, you want to be standing on of a mountain of human skulls.

I sat down and we tried to come up with just about every type of transaction and piece of paperwork that you would ever want to have to settle an action to quiet title.  Below is a great resource of legal forms that should help document the chain of title.

From what I found and know this page is the ONLY place in the world where give this kind of stuff away for FREE… so download and enjoy.

Here is a Bunch of Legal Paperwork to use With an Action to Quiet Title

You are most likely going to need extensive paperwork and documentation to get the suit to quiet title settled and finally get a clean, unclouded and uncontested title.  Sometimes this will many documenting a loan or a lien while at the same time filing the release of that lien.

Below I’ve gone over several pieces of of legal contracts and paper work that we have used in these cases, they are all in Word format so you can download and edit them any way that you need.  If need more help just let me know in an email or a comment below.

Family Loan Agreement

You almost never want to borrow money from family, but if you do then you probably NEVER had a legal agreement.  This can create disagreements later when it comes to who owns the title.  Your uncle may show up and say that since he paid the down payment on your car and gave you free room and board, you owe him $50,000.  If he puts a lien on the property you will have to get paperwork to get him to release it. This was a real life scenario, and in other situations the above document has been a life saver.

Promissory Note (Secured)

Promissory Note (Unsecure)

A promissory note can be something like an IOU, it is a basic acknowledgement of debt and I included two versions based on whether it is secure or unsecured.  This is an important distinction because it makes it clear whether the lender has the right to make any claims against or on any of your property.

There are some state specific forms that your attorney may want to use, here are two examples:

Missouri Secured Promissory Note

Indiana Unsecured Promissory Note

Remember to use your attorney and title company for this, they may use these forms or maybe they want to use their own.  The main lesson here is that you should be familiar with the process and know what is happening.

Personal Loan with Guarantee

This can be used to document any money or loans given to you and any guarantees that you made.  Sometimes before you can show that debt is removed the title company may want to documentation that it existed.  In those cases you may need a document like this.

Standard Loan Template

This can be used for basically any kind of loan, owner financing, seller carry backs, etc.  This will establish a legitimate claim on the property and the specific pay back amounts and terms will be clearly outlined.  Sometimes we’ve recorded this at the same as the release (below) so that the title company and courts can see a transparent lien and lien pay off.

Okay so that should just about do it, there is basically no other way that you or your clients will get money that we can’t track with one or more of the above documents.

Now the Fun Part: The RELEASE of Claims on Title

Sometimes filing a release is not enough and you may need to file some documentation of the debt first, that’s why I included all the above forms.   Now you NEED to have some release of that debt in order to get a clear title.

In general, to get a clear title and make your suit to quiet title claims go well, you want to have some basic elements in place.

Five Basic Parts of Title Release Document

1.) The name of the borrowers and lenders

You need to show who borrowed the money and who provided the money.  This needs to be the same name as the person making any claims.  This will included things like “III” in John Doe III.  This is why you want the title company involved so they can get their criteria met in real time.

2. ) The dates of the original note and the contract

You may not have the original contract which is why you can use one of the above forms to retroactively come up with the the terms.  Again do NOT do this yourself, have the attorneys file this so that you know you are protected and that is in legal accordance with what the title company wants to see.

3.) The terms of the loan, total amounts paid and completion date

This will show that there was a successful fulfillment on the borrowers’ part of the agreement.  You want to show exactly how much was paid every month (or whatever increment was used) and the total amounts paid.  There should be an exact end date documented as well.

4.) Agreed release and relinquish of all liabilities.

The lender agrees that the borrower satisfied all conditions in their agreement and now the borrower is released from legal, personal and any financial liability regarding this debt and claim.  This is the borrower’s way of being protected from any future claims from the lender.  

5.) Notarized signatures of all parties and witnesses.

This makes the agreement legally binding.  Again you want to make sure that the title company, the attorneys and the courts are satisfied that the borrowers and lenders are properly named.  If the lender is a company then the person signing needs to have documented proof that they are official representatives and can speak on behalf of the company.

With that being said here are  some examples of release documents that you can use.

Lien Release Documents

You want to make sure that your attorneys are handling this for you and your clients.  You CAN use this in court and all of these documents have been used in the “real world” but you still want your legal team involved.

Release of Personal Guarantee

This will get you “off the hook” from a claim that you used property as collateral or made a personal guarantee regarding a loan.  In one case we had a borrower who owed money to a lender from a private loan that was not against a property. 

The title company however, still wanted to see that the lender would have no way to make a claim against the property.  To protect the property the title company and the attorney recorded a release of personal guarantee.  That’s one example of where this would be used.

Promissory Release

If a promissory note is recorded on a property’s title then you want to have a release recorded when it is paid off.  There are many different kinds of funding that can fall under the umbrella of a promissory note, and they each need to be accompanied with a release.

Satisfy and Release of Mortgage, Loan, Lien

This will document that a specific mortgage, lien, loan, etc. has been satisfied and the lender is removing their claim and release the borrower from liability.  Remember that sometimes this will be recorded immediately after recording the loan itself just a precaution so that the title company can show a cleaner history on the title chain.

A sample Action to Quiet Title Binder of Paperwork

This came to us from one of you guys, friend Lawyer Mark sent this to us from the East Siiide… there is a reason this is LAST.  We do NOT suggest that you try to file this yourself.  This .pdf is editable and you can use it as practice to see what information is required but do NOT submit this without an attorney.

This is a full breakdown of all the pieces of info and help from legal people on how each of the forms works and how to fill them out.  This is to get you familiar and comfortable with this process in case you or your clients ever have to deal with it.

Here is the sample action to quiet title pdf here.

Here is another breakdown of quiet title docs for the state of Kansas here.

Here is some packet of info on quiet title filing for Philly here.

Remember this isn’t just about real but ANY real property, to that point here is a sample of an action to quiet title on the title of a car.

Okay, did I miss anything?

I don’t think so, at least not right now.

We will be adding to this page as you guys ask us more.

If there is anything on this that we missed or anything else we can help let me know.

Thanks so much!  = )

Anisa

Love @ BigReia.com

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