Home Blog Certificate of Title (What It Is And Why It’s Important: Overview)

Certificate of Title (What It Is And Why It’s Important: Overview)

What is Certificate of Title?

Why do you need a certificate of title?

What are the essential elements you should know!

Keep reading as I have gathered exactly the information that you need!

Let’s see what certificates of title represent and why they are so important!

Are you ready?

Let’s get started!

What Is Certificate of Title

A certificate of title refers to an official document that evidence’s a person or company ownership in a real estate property or a movable property such as a car, boat, business, or other.

Typically, you’ll need an original certificate of title when you are dealing with a type of property that effectively has title such as real estate properties (house, land, or other) or movable properties (generally a vehicle).

That’s why you may hear phrases like a certificate of title real estate, land certificate of title, or car certificate of title.

Certificate of Title Content

The information that you’ll find in a title certificate is generally:

  • Name of the owner (title holder)
  • Description of the property 
  • Information of lienholders

The objective of the certificate is to legally establish or prove the owner of a property.

As a result, the three main pieces of information that you’ll find in the document are the name and identification of the owner, description of the property, and the list of any lienholder or third parties having a recorded lien or encumbrance on the property.

The owner can be an individual or a company.

The property can be any type of property that bears title (most often, real estate properties and vehicles).

Certificate of Title Definition

According to Investopedia, a certificate of title is defined as:

A certificate of title is an official state or municipal-issued document that identifies the owner(s) of personal or real property. A certificate of title provides documentary evidence of the right of ownership. Usually it applies to real estate, though it also may pertain to a business, boat, or vehicle, among other things.
Author

As you can see from this definition, a certificate of title is a:

  • Document 
  • That identifies the owner 
  • Of real property or movable property 

In most cases though, when referring to a certificate relating to title, we are referring to the proof of ownership of a real estate property.

Transfer Certificate of Title

An owner of a property has the right to sell the property (alienation rights).

As such, as part of the purchasing process, the buyer along with the buyer’s lenders or creditors will want to ensure that they are acquiring a valid title free and clear from other claims or encumbrances.

To prove that the seller owns the property in question, the seller must produce a certificate of title property.

In essence, when a property is sold, the certificate of title is transferred from the property seller to the property buyer.

When the property title is clear, the transfer (or sale) goes through without any problem.

However, if the title search reveals that the property is not free from liens or other debt, then further investigations may need to be performed to understand why and how it can affect the purchase.

Buyers want to purchase property where the title is free and clear from any liens or encumbrances (we say that the title needs to be clear).

A clear title means that there are no creditors or lenders who may assert a possible claim against the property for having borrowed money from the seller.

Certificate of Title Search

When a title insurance company performs a title search and issues a “certificate of title”, the certification also contains their opinion on the validity of the owner’s title.

In other words, for a title insurance company to issue a property certificate of title, it will perform a thorough investigation on the current owner’s title to ensure that effectively the owner has a good title on the property.

Typically, the title search involves looking into public records and databases in order to determine the property owner’s right of ownership or find evidence that the owner has a valid property title.

When a proper title search is done, you’ll have the assurance that the title of the property is “clear” and there may be no outstanding back taxes, outstanding sums owed by the seller to its creditors, or the property is not given to someone as collateral.

Certificate of Title Insurance

Even though you may consult public records to determine whether a property is subject to encumbrances, liens, or easements, it may not possible to have a 100% guarantee that the title of a property is clear.

In such cases, there may be encumbrances or liens that have not been recorded, perhaps the information was recorded but contained a spelling mistake so it was not identified, or there may have even been acts of fraud where an actual encumbrance was not properly recorded.

In any event, to protect yourself against instances where the title search reveals that the title is clear but it may actually not be, you can get yourself title insurance to protect yourself against possible claims.

In some cases, your mortgage lender or bank may require that you acquire title insurance if there is doubt about the title or as a measure to prevent losses should a seller creditor show up one day with a claim against the buyer.

Certificate of Title vs Deed

What is the difference between a certificate of title and a deed?

Although both documents may be necessary for the closing of a real estate transaction or the sale of a property, they are not necessarily the same thing.

A certificate of title refers to an “opinion” or “verification status” performed by title companies in order to verify whether or not the title of a property is clear.

To issue a certificate, title companies will look into public records, databases, and consult various records to get a better understanding of the background of the property and whether or not the title is encumbered or not.

On the other hand, a deed is a document that is signed to transfer a property from one person to another.

The deed is a document that is generally signed by the seller and the buyer where the parties outline the terms of the transaction, identify their names, describe the property, and include other aspects of the deal.

The person transferring the property is the grantor and the person receiving the property is the grantee.

Certificate of Title vs Title

Is a certificate of title the same as title?

Although a certificate of title and title relate to similar things, they can be slightly nuanced.

In real estate, a certificate of title is the evidence or proof that the seller’s title is free and clear from encumbrances or it lists the type of liens and encumbrances registered against it.

A title, generally speaking, refers to the ownership of property or an asset that can be real property, personal property, or intangible property like trademarks and intellectual property.

Titles can be separated into two categories, personal property titles or real property titles.

Personal property title refers to all assets that may bear a title but are not real (like land or real estate) and can include corporeal property (merchandise, jewelry, equipment etc) along with incorporeal property (copyright, patents, trademarks, etc).

Real property title are rights in real estate or land properties.

As you can see, a certificate of title refers to whether “title” is free or encumbered (having cloud on property) and the title refers to the ownership of real or personal property.

Certificate of Title Example

What is an example of a certificate of title to better illustrate the topic?

Most often, you’ll deal with certificates of title when purchasing a car or a home.

Example 1: Car Purchase

When you purchase a car, you’ll need a certificate of title to prove that the title of the vehicle is clear.

This is important as you don’t want to purchase a vehicle where the previous seller had recorded a lien on the vehicle for having borrowed money from the seller.

If the seller does not pay off his or her creditor, the third party creditor’s claim against the property will remain registered against the property.

To ensure that your car title is free and clear, you need to ensure that you get your certificate of title to validate that you will not have to deal with the seller’s creditors or third parties having a claim on the vehicle.

Example 2: Home Purchase

Another example of a certificate of title in action is when you are buying a real estate property.

A certificate of title is an opinion issued by a title company further to a deep and thorough investigation of public records and documents registered against the property.

The objective of a title search is to ensure that all possible creditors are identified and paid off by the seller before the property title is transferred.

The title “certificate” allows the buyer and the buyer’s creditor to have comfort that nobody else can assert a claim against the property.

Certificates of Title Takeaways 

So there you have it folks!

What is a certificate of title?

The certificate of title is the official evidence of ownership of property, such as a house, land, car, truck, motorcycle, boat, utility trailer, mobile home, or something similar.

In the context of the transfer of property from one person to another, a certificate of title is used to ensure that the seller’s title is free and clear of any liens.

The house certificate of title or automobile certificate of title will often contain the name of the owner, owner’s address, features of the property, and any information relating to the property encumbrances to the extent found.

In the context of real estate transactions, when the certificate of title is issued by a title company, the certificate will also contain the title company’s opinion relating to the title held by the seller.

It’s very important that you have a good understanding of a certificate of title, its purpose, and why it is used so you are better prepared to deal with the purchase and sale of a property.

I hope this article provided you with a simple definition of a certificate of title and gave you the information you need to deal with it.

My Investing, Business, and Law Blog

By the way, on this blog, I focus on topics related to starting a business, business contracts, and investing, making money geared to beginners, entrepreneurs, business owners, or anyone eager to learn. 

Just so you know who I am and where I come from, a little about me…

I have a university degree in finance and law. 

I have worked in an international financial institution dealing with the stock market, stock, bonds, corporate financing, and securities.

I practiced law in private practice where I advised and consulted entrepreneurs and business owners on many aspects of their business, such as how to start new business ventures, how to scale their business, how to navigate commercial contracts, and how to set themselves up for success. 

I also acted as an in-house counsel and eventually as the General Counsel in a rapidly growing technology company going through hypergrowth, dealing with international Fortune 500 clients, and operating internationally. 

Let me tell you, in my career, I’ve learned a lot about business, investing, investment decisions, business decisions, and law. 

I started this blog out of my passion to share my knowledge with you in the areas of finance, investing, business, and law, topics that I truly love and have spent decades perfecting.

You may find useful nuggets of wisdom to help you in your entrepreneurship journey and as an investor.

Hey You!
Looking For Real Actionable Tips To Reach Your Financial And Business Goals?

If you’re interested in my actionable tips, guides, and knowledge on how to achieve your financial and business goals, subscribe to my blog and I’ll share with you my premium and exclusive content that will blow you away!

I’d love to share the insider knowledge that I’ve acquired over the years helping you achieve your business and financial goals.

Now, let’s look at a summary of our findings.

Define Certificate of Title (Overview)

  • A certificate of title for a vehicle (also known as car title or automobile title) is a legal document that establishes that a person or company owns the vehicle
  • In real estate, a certificate of title is an opinion provided by a title company indicating that the real estate property is free from encumbrance or has liens recorded against it (or other rights granted to creditors)
  • The information that is usually found in a certificate of title is the information about the owner (name and address), technical information about the property, and if there are any lienholders with liens registered against the property 
  • Although it’s not possible to have full certainty that the title of a property is clear, in the event of any doubt or for more protection, you can subscribe to a title insurance policy for more protection 
Absolute sale 
Car certificate of title 
Car title 
Certified title 
Chain of title 
Clear title 
Cloud on title
Contract lawyer 
Deed of purchase
Foreclosure 
Grantee 
Grantor
How to get a certificate of title 
Land certificate of title 
Lost title to car 
Notary public 
Purchase price
Real estate lawyer 
Sticker price 
Title bureau 
Title for house 
Title insurance 
Title search 
What is a deed
What is a lien 
What is title insurance
Author
Application for title 
Bill of sale 
Bona fide purchaser
Capitalized cap cost
Convenyance of title 
Damage disclosure statement 
Deed registration 
Equitable title
Escrow agent
Escrow agreement
Estoppel deed
Joint ownership 
Joint tenancy 
Junk title
Legal title
Naked title 
Notice of lien 
Proof of ownership 
Property encumbrances 
Quiet title 
Quitclaim deed 
Service contract
Sole ownership 
Statement of transaction 
Strata title 
Tenancy in common 
Tenants by entirety 
Torrens title
What is an easement 
What is personal property
Author
Editorial Staff
Hello Nation! I'm a lawyer by trade and an entrepreneur by spirit. I specialize in law, business, marketing, and technology (and love it!). I'm an expert SEO and content marketer where I deeply enjoy writing content in highly competitive fields. On this blog, I share my experiences, knowledge, and provide you with golden nuggets of useful information. Enjoy!

Most Popular

Form LLC-12 (What It Is And How It Works: All You Need To Know)

Form LLC-12 (What It Is And How It Works: All You Need To Know)

Form SI-550 (What It Is And How It Works: All You Need To Know)

Form SI-550 (What It Is And How It Works: All You Need To Know)

Biennial Statement (New York: What It Is And How It Works)

Biennial Statement (New York: What It Is And How It Works)

Tender of Delivery (Legal Definition: All You Need To Know)

Tender of Delivery (Legal Definition: All You Need To Know)

UCC 2 601 (Explained: Buyer’s Rights on Improper Delivery)

UCC 2 601 (Explained: Buyer’s Rights on Improper Delivery)

UCC 2 508 (Explained: Cure By Seller of Improper Tender)

UCC 2 508 (Explained: Cure By Seller of Improper Tender)

UCC 2 612 (Explained: Installment Contracts And Its Breach)

UCC 2 612 (Explained: Installment Contracts And Its Breach)

Substantial Performance (Contract Law: All You Need To Know)

Substantial Performance (Contract Law: All You Need To Know)

Editor's Picks

Consortium Agreement (What Is It And How Does It Work)

Consortium Agreement (What Is It And How Does It Work)

Coterminous (Legal Definition And Contracts: All You Need To Know)

Coterminous (Legal Definition And Contracts: All You Need To Know)

Iron Butterfly Options (Definition: All You Need To Know)

Iron Butterfly Options (Definition: All You Need To Know)

MSA Agreement (Best Overview: All You Need To Know)

What is an MSA agreement? Why do you need an MSA? What are the elements of...

How To Start A Business In Kentucky [Step-By-Step Ultimate Guide]

How To Start A Business In Kentucky [Step-By-Step Ultimate Guide]

Texas Corporation Search (Guide: All You Need To Know)

Texas Corporation Search (Guide: All You Need To Know)