Question 34

Undischarged mortgage may become a cloud on a title.

An undischarged mortgage is a financial encumbrance that can create a cloud on a title, indicating that the property is still subject to the mortgage lien even if the borrower has satisfied the debt. This situation can complicate ownership transfer and create legal complications for potential buyers.

A) Deed restriction

A deed restriction is a provision that limits how a property can be used and is typically placed in the deed by the seller. While it can affect property use, it does not create a cloud on the title in the same way a mortgage does, as it does not indicate a financial obligation owed.

B) External obsolescence

External obsolescence refers to a decrease in property value due to external factors, such as changes in the neighborhood or market conditions. It is an economic issue rather than a legal encumbrance and, therefore, cannot constitute a cloud on a title.

C) Zoning variance

A zoning variance is a legal exception to zoning laws that allows a property owner to use their land in a manner not typically permitted. While it can affect property use and value, it does not represent a lien or encumbrance on the title, thus not qualifying as a cloud on the title.

D) Undischarged mortgage

An undischarged mortgage signifies that the property is still legally bound by a mortgage agreement, which can impede the transfer of ownership until it is resolved. This financial obligation creates a cloud on the title, making it a significant barrier for clear property ownership.

Conclusion

The presence of an undischarged mortgage is a definitive reason for a cloud on a title, as it indicates unresolved financial obligations attached to the property. In contrast, the other options, including deed restrictions, external obsolescence, and zoning variances, do not generate a similar legal encumbrance that would cloud the title. Thus, D is the only choice that accurately reflects a situation that can create complications in property ownership.