Define: Defective Title

Defective title is a legal term used to describe a situation where the seller of a property does not have full and clear ownership rights to transfer to the buyer. This defect can arise due to various reasons, such as unresolved liens, undisclosed encumbrances, adverse possession claims, or errors in the chain of title documentation. When purchasing real estate, having defective title can lead to legal disputes, challenges to ownership, and financial losses for the buyer. It is essential for buyers to conduct thorough title searches and obtain title insurance to protect against defects in title and ensure clear ownership rights before completing a real estate transaction.

An owner’s Title to land or goods can be ‘defective’ (that is, less than perfect) in at least four ways.

1. He may not be the owner at all. Of course, the reason why a person seeks to sell something he does not own might be because he is a villain. However, a person may be dispossessed of his title by the action of law, and then find that he cannot pass title in a sale. For example, the owner of unregistered land may be dispossessed by a squatter if he loses his right to remove the squatter after 12 years (see adverse possession). Although the dispossessed owner holds the title deeds, if the squatter has subsequently been registered as the proprietor, the former owner no title to pass.
2. The owner may have limited powers of disposition. This situation often arises where the owner is a company; its powers to buy and sell property may be limited by statute or by its own articles. As far as land is concerned, the LRA (2002) now makes it clear that a person (legal or natural) who sells property outside its powers is not prevented from giving good title simply by the fact that the sale was ultra vires; however, both the seller and the buyer may still be acting unlawfully.
3. The property is subject to Incumbrances (that is, third-party rights are against it).
4. The title may have become determinable. That is, someone else may have the power to bring the title to an end. This situation usually occurs in the context of Leasehold land, where the tenant has done something that gives the landlord aright to reenter, but that right has not yet been exercised.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March 2024.