What Happens If a Title Problem Is Found After Closing?

Few things are more unsettling than receiving a letter months or years after closing claiming someone else has rights to your property. Perhaps a contractor files a mechanics lien for work done by a previous owner. Maybe a long-lost heir surfaces claiming they never consented to the sale. Or a neighbor produces documents showing an easement across your backyard that wasn't disclosed.

These scenarios aren't common, but they happen often enough that every property owner should understand what to do if title issues emerge after closing. The good news is that if you purchased owner's title insurance—which you should have—you have powerful protection against these problems.

Over nearly 60 years protecting Utah property owners, Prospect Title has handled countless post-closing title issues. This guide explains the most common title problems discovered after closing, how title insurance protects you, the claims process, and what to do if you find yourself facing a title challenge.

What Title Problems Can Be Discovered After Closing?

Even with thorough title searches, some defects slip through. Here are the most common title issues that surface after closing:

Undisclosed Liens

Liens that weren't discovered during the title search can appear later:

• Tax liens: Federal or state tax liens that were filed but not yet indexed when the title search was conducted
• Mechanics liens: Contractors or suppliers who claim they weren't paid for work done before you purchased the property
• Judgment liens: Court judgments against previous owners that weren't discovered due to name variations or filing errors
• HOA liens: Homeowners association liens for unpaid dues from previous owners

In Utah, mechanics liens can be filed up to 180 days after work is completed, meaning a contractor could file a lien after you've already closed on the property for work performed before closing.

Boundary and Survey Issues

Boundary disputes often don't surface until someone tries to build a fence, add a structure, or sell the property:

• Your fence is actually on your neighbor's property
• A neighbor's shed or garage encroaches on your land
• The property boundaries are different than described in your deed
• The property is smaller than represented

Standard title insurance doesn't cover survey issues unless you purchased an enhanced policy with survey coverage or had a survey done before closing.

Easements Not of Record

Some easements exist even though they weren't recorded:

• Prescriptive easements created by long-term use
• Easements by necessity for landlocked properties
• Easements established by court order that weren't properly recorded
• Utility easements established by historical use

A neighbor might claim they've been using a path across your property for decades and have prescriptive easement rights, even though no recorded easement exists. Learn more about how easements affect your property.

Forgery and Fraud

Forged signatures or fraudulent conveyances in the chain of title can invalidate ownership:

• A previous deed was signed by someone pretending to be the owner
• A forged power of attorney was used to sell property
• Identity theft allowed someone to fraudulently convey property
• Documents were altered after signing

These situations are rare but can be devastating. If a deed in your chain of title was forged, it's void, and everyone who purchased after that forgery may not have valid ownership.

Missing or Undisclosed Heirs

When property passes through estates, sometimes not all heirs are identified:

• A child who was adopted or born out of wedlock wasn't included in the estate distribution
• Heirs who couldn't be located at the time of estate settlement later surface
• Ex-spouses claim they never relinquished their interest in the property
• Foreign or distant relatives appear claiming inheritance rights

These claims can arise years or even decades after the estate was settled and the property sold.

Marital Interest Issues

Problems with marital interests can cloud title:

• A spouse didn't sign the deed but had homestead or other marital rights
• A divorce decree wasn't properly recorded
• Community property rights weren't properly resolved
• A spouse's death wasn't properly documented

Errors and Omissions

Clerical errors, while uncommon, can create serious problems:

• Incorrect legal description in a prior deed
• Wrong property transferred due to similar addresses
• Typographical errors in recorded documents
• Documents filed in the wrong county

How Does Title Insurance Protect You from Post-Closing Problems?

Title insurance is unique in the insurance world. Unlike other insurance that protects against future events (like fire or theft), title insurance protects against past events that surface after you purchase the property.

What Owner's Title Insurance Covers

A standard owner's title insurance policy in Utah covers:

• Forged documents: If any document in your chain of title was forged
• Fraud or duress: If a prior owner was forced or tricked into signing a deed
• Unknown liens: Liens that existed at closing but weren't discovered in the title search
• Errors in recording: Mistakes made in recording documents or indexing them
• Invalid deeds: If someone who signed a deed didn't have legal capacity or authority
• Missing heirs: Claims from heirs who should have been included in prior transactions
• Marital rights: Claims by spouses who didn't sign documents but had property rights
• Contested wills: If a will through which you acquired title is later contested

What Title Insurance Doesn't Cover

Understanding exclusions is equally important:

• Defects you created: Problems arising from your own actions after purchasing
• Known defects: Issues that were disclosed and listed as exceptions in your title commitment
• Governmental actions: Eminent domain, zoning changes, or building code violations
• Environmental hazards: Contamination, protected species, wetlands
• Native American claims: Claims by Native American tribes (special exception)
• Survey issues: Boundary disputes unless you purchased enhanced coverage

The Value of Title Insurance

Title insurance provides three critical benefits:

1. Financial protection: The insurer pays claims up to the policy amount, protecting your investment
2. Legal defense: The insurer defends your title in court if challenged, paying all legal costs
3. Problem resolution: The insurer works to resolve title issues, often without litigation

For a one-time premium paid at closing, you receive protection that lasts as long as you or your heirs have an interest in the property. This is dramatically different from annual insurance premiums you pay for other types of coverage.

What Should You Do If You Discover a Title Problem?

If you discover or are notified of a potential title issue, take these steps immediately:

Step 1: Don't Ignore It

Never ignore letters, notices, or claims related to your property title. Time limits may apply to respond to certain claims, and ignoring the issue won't make it go away. In fact, failing to respond promptly can hurt your position.

Step 2: Contact Your Title Insurance Company

Call your title insurance company as soon as you become aware of a potential problem. Provide them with:

• Your policy number
• A description of the issue
• Copies of any correspondence or documents you've received
• Any relevant dates or deadlines

Many title insurers have 24/7 claims hotlines. If you purchased your policy from Prospect Title, contact us directly—we'll help initiate the claims process and coordinate with the underwriter.

Step 3: Gather Documentation

Collect all relevant documents:

• Your title insurance policy
• Your deed
• The title commitment from your closing
• Any correspondence about the claim
• Legal notices or court documents
• Supporting documents related to your ownership

Step 4: Don't Make Admissions or Agreements

Don't admit liability or enter into agreements with the person making the claim without consulting your title insurer first. Doing so could affect your coverage. Let the title insurance company handle communications with the claimant.

Step 5: Follow the Insurer's Guidance

Your title insurance company will guide you through the process. Cooperate fully by:

• Providing requested information promptly
• Signing necessary documents
• Attending meetings or depositions if required
• Following their attorney's advice

How Does the Title Insurance Claims Process Work?

Understanding what happens after you file a claim helps reduce anxiety during an already stressful situation:

Phase 1: Claim Intake and Initial Review

When you contact your title insurer about a potential claim:

1. A claims representative will take your information and create a claim file
2. You'll receive a claim number and contact information for your claims examiner
3. The examiner will request documentation and a written statement of the problem
4. The insurer will review your title policy to determine if the issue is covered

Phase 2: Investigation

The claims examiner investigates the title issue:

• Reviews the claim against your title policy
• Examines the chain of title and relevant documents
• Researches the validity of the claim against your title
• Determines whether the issue is covered under your policy
• Assesses potential exposure and resolution options

This investigation typically takes several weeks, though simple issues might be resolved quickly while complex matters take months.

Phase 3: Coverage Determination

The insurer will notify you whether the claim is covered:

• If covered: The insurer proceeds to resolve or defend against the claim
• If not covered: They'll explain why the issue falls outside policy coverage and you'll need to address it yourself
• If partially covered: They'll clarify which aspects are covered and which aren't

Phase 4: Resolution or Defense

For covered claims, the insurer will take action:

• Negotiated settlement: Often the fastest resolution—the insurer negotiates with the claimant to release their claim, typically by paying them
• Quiet title action: The insurer files a lawsuit asking the court to declare your title valid and clear
• Defense: If you're sued, the insurer provides attorneys to defend you at their expense
• Compensation: If the title defect can't be cured, the insurer compensates you for your loss up to the policy amount

Most title claims are resolved without litigation. The insurer's goal is to eliminate the cloud on your title as efficiently as possible.

Phase 5: Claim Closure

Once the issue is resolved:

• The insurer obtains releases or court orders clearing the title issue
• Corrective documents are recorded with the county recorder
• The insurer provides you with documentation showing the issue has been resolved
• Your title is clear, and you can proceed with confidence

What If Your Claim Involves Your Lender's Title Insurance?

Most property purchases involve two title insurance policies:

• Owner's policy: Protects your equity in the property
• Lender's policy: Protects your lender's mortgage interest

If a title defect threatens both your ownership and the lender's security interest, both policies may be involved. The lender's policy typically takes priority because it was required by the lender, but this doesn't diminish your protection.

Often the same title insurance underwriter issued both policies, simplifying the claims process. The insurer works to resolve the issue in a way that protects both you and your lender.

What Legal Options Do You Have Beyond Title Insurance?

While title insurance is your primary protection, other legal remedies may exist:

Claims Against the Seller

If you received a warranty deed, the seller warranted that they conveyed clear title. If title defects existed at closing, you may have a breach of warranty claim against the seller.

However, this remedy has limitations:

• The seller must be solvent and reachable
• You bear the burden and cost of suing them
• They may not have resources to compensate you
• If you received a quitclaim deed or special warranty deed, the seller's warranties are limited or nonexistent

This is why title insurance is far more valuable than warranty deed covenants—the insurer has resources and obligation to protect you. Learn more about different types of deeds and their warranties.

Claims Against the Title Company

If the title company was negligent in conducting the title search—for example, they failed to discover a recorded lien that should have been found—you may have a negligence claim against them separate from your title insurance claim.

However, these claims are difficult to prove because:

• Title companies have no duty to discover unrecorded defects
• They're not liable for defects that weren't discoverable through reasonable examination
• Most errors are covered by title insurance, eliminating your damages

Adverse Possession or Prescription Claims

In some situations, you might defend against claims by arguing you or previous owners adversely possessed the property or established prescriptive rights. These defenses require meeting specific legal standards over long periods (20 years in Utah for prescriptive easements).

How Can You Prevent Title Problems?

While title insurance protects you from problems that slip through, following these best practices helps prevent issues in the first place:

Before Closing

• Review the title commitment carefully: Read all exceptions and ask about anything you don't understand
• Get a survey: A survey reveals boundary issues and physical encroachments that title searches might miss
• Resolve issues before closing: Don't proceed with closing if significant title issues remain unresolved
• Insist on clear title: The seller should deliver clear, marketable title as promised in the purchase agreement
• Purchase owner's title insurance: Never waive owner's title insurance to save money—it's your most important protection
• Consider enhanced coverage: If available, enhanced title insurance policies cover additional risks like boundary issues

After Closing

• Keep your title documents safe: Store your deed, title policy, and closing documents securely
• Record all relevant documents: If you later create easements, make improvements, or change ownership, record appropriate documents
• Address neighbor disputes promptly: Don't let boundary or easement issues fester—resolve them while they're small
• Maintain property tax payments: Unpaid property taxes can lead to tax liens and even tax sales
• Verify property boundaries: If you're building improvements near property lines, verify exact boundaries first

When Selling

• Disclose known issues: Failing to disclose title issues you know about can lead to liability
• Clear liens before listing: Pay off mortgages, mechanics liens, and judgment liens
• Resolve disputes before selling: Address boundary disputes, easement issues, or other clouds on title
• Provide a warranty deed: Buyers expect warranty deeds for standard sales—only use quitclaim or special warranty deeds when appropriate

Real-World Example: How Title Insurance Saved a Utah Homeowner

A Prospect Title client purchased a home in a Salt Lake County suburb. Eighteen months after closing, they received a certified letter from an attorney representing someone claiming to be an heir of a previous owner from three transfers back.

The claimant alleged that the estate distribution 15 years earlier was invalid because they weren't notified as an heir. If true, this meant the chain of title was broken and the current owner might not have valid ownership.

The homeowner immediately contacted Prospect Title, who filed a claim with the title insurance underwriter. The underwriter's investigation revealed:

• The claimant was indeed an heir who should have been included in the estate proceedings
• However, the statute of limitations for contesting the estate distribution had expired years earlier
• The claimant's late discovery didn't extend these time limits

The underwriter's attorneys successfully argued that the claim was time-barred. However, to eliminate any cloud on the title and avoid future challenges, they negotiated a settlement paying the claimant $15,000 to execute a quitclaim deed releasing any claims.

The entire process took five months. The homeowner paid nothing—the title insurance covered the settlement and all legal fees. Without title insurance, the homeowner would have faced tens of thousands in legal costs to defend their ownership, with no guarantee of success.