What is a cloud on title?

A cloud on title refers to a claim or encumbrance on a property title that may affect the owner's ability to transfer the title without issues. This encumbrance could take the form of liens, mortgages, easements, or other legal claims that could potentially challenge the ownership or marketability of the property.

Having a clear title is crucial for property transactions, as it assures buyers that the property is free from disputes or claims. When there is a cloud on the title, it often requires resolution before a sale can proceed smoothly. This could involve legal action or negotiations to clear the title, ensuring that the new owner receives a clean title at closing.

In contrast, the other options describe different scenarios that do not accurately represent the legal implications of a cloud on title. For example, messiness in property boundaries pertains to disputes over the physical delineation of a property, while a missing signature on a deed signifies a procedural error rather than an encumbrance. An informal agreement among neighbors lacks the legal weight and formal implications associated with title claims.