Legal Question in Real Estate Law in California

As a former officer of and litigation counsel for the parent company of Fidelity National Title and Chicago Title, among others, I have to tell you that there is no such thing legally or in the title industry jargon as saying "title cleared" or a property "cleared title." You can "clear" title of a particular "cloud" on title, but there is no such thing as "title cleared and title was transferred" supposedly or otherwise. So really the root of a whole lot of your trouble is that you entered into a real estate transaction with a lack of knowledge and understanding of land title practices and law. I also cannot figure out why you had a landlord for a property you purchased or what your mortgage broker being "in bed" with any landlord has to do with your transactions. Then you have gone and made your situation worse by trying to conduct a Bankruptcy Court aversary proceeding pro se. And now, seven years later, and three years after the latest possible point at which you found you had a problem, you are looking for free answers on the internet? The statute of limitations for fraud is three years. Contract is four. Pretty much any other remedy you might have has either already run out or will in a matter of months. There is another lawyer on our panel who likes to say "if you can't afford a lawyer, you must be able to afford to lose the case." Either hire a lawyer or give up and stop wasting everyone's time.

Despite giving us a lot of information, some key facts are missing and needed to determine whether there has been a fraud or breach of contract, and what the result was of your adversary proceeding in bankruptcy. Then, I think your main problem is going to be whether the applicable statute of limitations has run. Since you may have limited time (if any) to get a complaint on file, I strongly suggest you see a lawyer in the county where the deal was made or the property is situated as soon as possible for a full evaluation of your case.

To answer your question, there is no legal requirement that liens be cleared when transferring title. It is usually done by the escrow company however, when the escrow instructions require the buyer to receive title to be clear of prior liens. In that situation, the escrow officer learns of recorded liens from a preliminary title report, and sends payoff demands to the lienholder. Those liens are then usually cleared while escrow is pending. This is a contractual obligation, and not an obligation imposed by statute.

The reason it is done this way is that there is a rule that a recorded lien constitutes constructive notice. That means a buyer of real property is deemed by operation of law to be aware of liens that have been properly recorded, regardless of the fact the buyer actually knew of the recorded liens. When real property is transferred, without paying off the lien, the lien follows the property. That is why the buyer wants title to be free and clear of the lien, so the buyer is not paying off the seller's old lien, whether that lien is a preexisting deed of trust, or an abstract of judgment.