Marketable Title
What is a marketable title?
A marketable title is one free from encumbrances and free of reasonable doubt as to the interest of 3rd persons. It is a title that the buyer will not have to defend in a litigation.
when the seller's title obligation are discharged?
Absent fraud or mental mistake when the buyer accepts the deed. Thereafter, the buyer's rights are based solely on the warranties, if any contained in the deed. The buyer's acceptance is prima facie evidence of the seller's compliance with the contract requirement as to the title and a breach of contract claim will not stand.
When an unmarketable title arises?
An unmarketable title arises when a search of the seller chain of title reveals: 1) ownership gaps 2) recorded judgments 3) mortgages or 4) where the inspection of the property reveals easements, encroachments or adverse possession.
What has been the holding of some courts?
Courts have been held that title is unmarketable when a threat of litigation will lead a reasonable person to believe that the buyer may be called upon to defend either possession or title.
What if the contract is to take a quick claim deed?
Even a contract to take a quick claim deed implies the requirement by the seller to tender a marketable title.
What if the real property contract makes no mention as to the quality of the title to be conveyed?
It is implied in the contract (but not in the deed) that the seller will tender a marketable title at the closing.
Does the buyer need to be forced to accept an unmarketable title?
No, a buyer shall not be forced to accept an unmarketable title or be required to buy a litigation.
when a property owned by an adverse possessor is marketable?
Property owned by an adverse possessor is not marketable until the court determines title.
What if the seller's current use of the property violates the existing zoning law?
The existing violation may render the title unmarketable.
When the obligation from the seller to render a marketable title is due?
The implied covenant of marketable title imposes no obligation on the seller until the date of the closing.
Can this requirement be waived?
The requirement that the seller will render a marketable title is for the buyer's benefit and the buyer may waive it and accept an unmarketable title.
What if the seller's current use violates the building code?
The seller's use of the property that violates the building code does not render the title unmarketable unless the building department has commenced litigation. Such defects relate to the condition of the property rather than the title.
what if the buyer takes title subject to existing rent control and zoning laws?
These laws limit the use of the land rather than affect the title. A change in these laws after the contract before the closing will not excuse the buyer from the contract. The buyer bears the risk of any change.
What is the merger doctrine?
Under the merger doctrine, the covenant of the marketable title merges into the deed when the deed is delivered to the buyer at the closing.