A Defective Title surety bond is a bond required by state Departments of Motor Vehicles when a person attempts to register a vehicle with a lost or defective title. This happens when a person purchase a vehicle from a seller with a bill of sale and fails to obtain a properly-endorsed vehicle title. When the buyer applies with the state to transfer the title, the state cannot accept the bill of sale. The only recourse to licensing the vehicle in the buyer’s name is to require them to post a lost or defective title bond that guarantees damages up to the bond limit for a legitimate title holder that may surface in the future with a valid claim to the vehicle.
These are also known as Lost Title surety bonds.