What is clear title?
Title is the legal interest a person has in a piece of property. When a person has clear title, it means that there is no question about whether they own a particular piece of property, because they can prove their ownership through legal documentation. However, many people are unaware that they have clouded title. A person has clouded title when they cannot prove their ownership through legal documentation, or they cannot prove who exactly owns the property.
How does someone get “clouded title?”
While there are many ways clouded title can occur, the most common is when the owner of a piece of property passes away and their heirs do not formally transfer the property through a legal process called a succession. (Successions are commonly referred to as “probate” in other states.) A succession is the formal, legal process of transferring a deceased person’s property. If the person had a Will, people named in the Will (called the “legatees”), will still have to complete a succession in order to formally transfer the property according to the Will.
What does this have to do with hurricanes?
South Louisianans face the threat of property damage every year during hurricane season. If you have clouded title, you may face several roadblocks when trying to access the funds you need to rebuild. Without clear title, you will not be able to sell your home, borrow money against your home, receive government aid through FEMA or the Small Business Administration, or even cash an insurance check.
Here is an example of how clouded title can negatively impact an average Louisianan:
Bill moved in with is mother, Mary, when she got sick in 2014. In addition to being her full-time caretaker, Bill takes over paying the property taxes and all of the general expenses of maintaining the house for the next five years. In 2019, Mary passes away. Bill continues to live in the house; he is now 65, and on a fixed income, so he is grateful to have the opportunity to live in house that is paid off. As an only child, Bill assumed the house automatically transferred into his name when his mom passed away.
Unfortunately, in 2021, Hurricane Ida hit Louisiana and pushed four feet of flood water into Bill’s home. Bill did not have flood insurance, and he cannot afford to fix his house on his own. Bill applies for a Small Business Administration (SBA) Loan, and a month after the storm, he receives a denial letter. The denial letter says that the program is only for homeowners, and Bill cannot show that he owns the home.
Bill then contacts a lawyer, who explains that he has to complete a succession for his mother’s estate in order to formally transfer title to the house into his name. While waiting on the succession documents, Bill has been staying in a hotel because his home is unlivable, and the home’s condition is getting worse as the weeks go on. The courthouse was damaged in the storm, and it takes three months for the succession to move through the court system. Now, four months after the storm, Bill submits an appeal to the SBA to show he now has clear title and to ask them to reconsider his denial. After another two months, the SBA finally approves his loan.
Because Bill did not have clear title, he was not able to even start the rebuilding process until six months after the storm. And unfortunately, six months is fairly quick for issues like this to be resolved. Three years after Hurricane Ida, there are still people who are displaced from their homes due to delay caused by this exact issue.
How can I make sure I have clear title?
The best time to take care of clouded title is during blue skies. If you are living in property you inherited from your family, and you have not talked to an attorney about a succession, now is the time to do it.
The information provided is not intended to be legal or tax advice and does not constitute any attorney/client relationship. You should consult with an attorney for individual advice regarding your own situation.
Ms. Melancon is an attorney with Legacy Estate & Elder Law of Louisiana, LLC with offices in Baton Rouge, New Orleans and Lake Charles, LA. The primary focus of her practice is estate planning, probate, special needs planning, and elder law. For more information or to attend an upcoming estate planning seminar, call her office at (225) 744-0027.
