Question 79

Undischarged mortgage may become a cloud on a title.

An undischarged mortgage can create a legal claim against a property, which may prevent a clear title transfer. This encumbrance must be resolved before the property can be sold or transferred without issues.

A) Deed restriction

A deed restriction is a provision in a deed that limits how a property can be used. While it can affect property use, it does not constitute a cloud on the title in the same manner that an undischarged mortgage does, as it does not create a financial claim against the property.

B) External obsolescence

External obsolescence refers to a reduction in property value due to factors outside the property itself, such as changes in the surrounding area. This concept does not create a claim or interest in the property title, hence it is not a cloud on the title.

C) Zoning variance

A zoning variance is a legal exception to zoning regulations that allows for specific use of the property. While it may affect the property's allowable uses, it does not create a title claim that would cloud the title, distinguishing it from an undischarged mortgage.

D) Undischarged mortgage

An undischarged mortgage is a loan secured by the property that has not been paid off, creating a lien against the property. This lien represents a financial claim that must be cleared for a property to have a clear title, thus qualifying it as a cloud on the title.

Conclusion

The undischarged mortgage is the only option that represents a financial obligation against the property, creating a cloud on the title that must be resolved. In contrast, the other options pertain to property use or value effects but do not impose a direct claim or encumbrance on the title itself. Therefore, option D is definitively the correct choice.