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Clouds on Title to Real Estate

What would you do if you found out someone filed a fraudulent deed with regards to your property? A deed filed by a minor or a person forging a signature of a deceased person purporting to convey the property. Such a fraudulent deed is a void deed, but that does not mean it has no effect on the property. It means the deed is voidable. Action must be taken in order to establish that the deed is fraudulent. Section 51.901 of the Government Code requires a county clerk to act if there is “a reasonable basis to believe in good faith that document or instrument previously filed or recorded or offered or submitted for filing or for recording is fraudulent.”

One way to trigger such action is for an aggrieved party to file an affidavit which includes the property’s legal description, send a copy of the affidavit to the perpetrating party, and demand that the fraudulent deed be canceled. If the affidavit is not done properly, then it will only make the cloud on the title to the property worse. Additionally, there is no guarantee a title company or lender will accept such an affidavit if and when the property is sold in the future.

A suit alleging fraud (both common law fraud and statutory fraud under Business & Commerce Code section 27.01) and requesting rescission and/or a declaratory judgment should be filed to quiet title to the property (i.e., clear the title). If such a judgment is obtained, then you have a much better chance a title company or lender will accept the problem is cured.

Note also that Civil Practice & Remedies Code section 12.002 provides that a person who knowingly and intentionally files a fraudulent lien or claim against real property may be held liable in civil district court for the greater of $10,000 or actual damages, exemplary damages, and recovery of attorney’s fees and costs. You should be aware, while attorney fees and damages may be awarded, the award of exemplary damages in such a suit requires an unanimous verdict.

Just last week, I had a couple come to see me because their property had been deeded partially to their minor daughter. They wanted to refinance the property and make some improvements to their home. However, the fact the property was partially owned by a minor caused a significant issue that will require some form of litigation. Bottom line, you should never deed property to a minor.

Such a lawsuit is expensive and takes a great deal of time. A title insurance policy insures that these matters have been diligently researched and addressed before money is exchanged in the transaction. You should understand there are different types of title insurance policies and different coverages and exemptions. However, a title policy may only be available upon the purchase of property. Fraudulent deeds could be filed at any time. If you know someone has filed a fraudulent lien or deed with regards to your property, you should seek legal assistance from an attorney immediately.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. www.moakandmoak.com