Title can be understood as the combination of owned legal rights that a person can own, representing ownership and possession of property [usually real property or real estate]. Title is the understanding of ownership of property, but can be broken up into two concepts –
(i) Legal title, which refers to the documentation in the public records and is commonly understood as a “bundle of sticks” where the owner of the bundle can parcel off pieces of ownership and grant them to others, e.g. giving someone an easement right to cross the property; giving someone rights to collect rents, etc. Legal title will generally require recording in the public records to be official.
(ii) Equitable title, which refers to the person’s equitable right to ownership of property. It is typically a financial stake in the property that later becomes legal title down the road; such as for a Buyer who is under contract to purchase a property. Once a buyer signs a sales agreement, they have a version of titled ownership to the land, but it is not legal ownership until the deed is transferred. Equitable title is also found with deeds of trust; the purchaser transfers legal title to the trustee, but retains the right to live there and enjoy the land, appreciating the benefit of the property to exclusion of everyone but the trustee.
Issues with legal title can arise unexpectedly and can disrupt or even terminate a transaction. For example, in the public record, there will be a “chain of title” that shows ownership from the present owner, back to the person they purchased it from, and so on and so forth down to the original government land grant [e.g. the U.S. Gov’t purchased Oregon from Great Britain, and granted 640 acres to married couples and 320 acres to single individuals who moved out West through the Oregon Donation Land Claim Act of 1850. As long as the person lived there and cultivated the land for 4 years, they acquired the land. As a result, nearly all land in Oregon will have a chain of title that marches back to the original land donations]. In a perfect world, the chain of title will be a single straight line of owners and purchasers from present to the original donation. In reality, humans make mistakes and deeds are no exception. Periodically, a “wild deed” will spring up and cause problems because the owner of the wild deed has no official connection to the chain of title.
Wild Deeds are best understood through story problems: Imagine a person, Albert, owns a large plot of land. They put the property in their will and state “My grandchild, Betty, will inherit this land,” and put a fully signed deed in their safe. Albert then forgets about the will and several years later sells the land to their neighbor, Claire. Claire records the deed and is the official legal owner of the land as far as Oregon is concerned. Albert dies and Betty, living on the other side of the country, receives the old signed deed from a grieving family member. Betty has no intent of moving to the old family farm, so she sells the land to their friend, Don, who sells it to Freddy, and so on and so forth. Eventually, Claire [the neighbor and official legal owner] decides to sell the land, and after publicly listing the land, gets a notice from some rando out in Virginia claiming to own the land. This is the wild deed scenario. The person out in Virginia is innocent in this case, they were confident it was a real deed they were buying when they bought it and are considered a “Bonafide purchaser.” Unravelling the gordian knot here can take time and effort, generally with the use of lawyers and title representatives filing a suit to quiet title.
Title insurance will oftentimes protect the policy holder from wild deed disputes when they arise. Where title is uncertain or unclear, the title insurance will potentially cover losses. Talk with your local title representatives to learn about what title insurance covers, and how it can help limit the client’s exposure to risk that comes with legal title errors.