Marketable title
Encyclopedia
Marketable title is a title that a court of equity
considers to be so free from defect that it will legally force its acceptance by a buyer. Marketable title does not assume that absolute absence of defect, but rather a title that a prudent, educated buyer in the reasonable course of business would accept. For real estate
practitioners, the most complete reference to title issues is found in the preprinted wording contained within an agreement/contract. If you cannot produce a clear title of deed
to the property then the prospective buyer should expect to lose in a specific performance
action. This is also known as a merchantable title which means that a title that is not perfect, but is considered acceptable to a reasonably well-informed buyer.
In the absence of an agreement to the contrary, there is an implied undertaking in the contract
that the vendor (person selling the property) has a marketable title. The contract typically provides that on failure of a vendor to deliver good and marketable title, the vendee (buyer) may rescind the contract and recover any deposit.
Merger
If a deed is delivered and it has no warranty of title, the buyer has no recourse because the deed supersedes the contract. This means that the initial contract
is no longer in effect.
Closing Date
Sellers only have to tender good and marketable title on the date the conveyance is executed (date of closing). So a seller may contract to sell property it does not currently possess. Liability will be imposed on the seller for breach only if the seller does not have good and marketable title on the date of closing.
* Defects that make title unmarketable
* Actions that do not defeat marketability
Court of equity
A chancery court, equity court or court of equity is a court that is authorized to apply principles of equity, as opposed to law, to cases brought before it.These courts began with petitions to the Lord Chancellor of England...
considers to be so free from defect that it will legally force its acceptance by a buyer. Marketable title does not assume that absolute absence of defect, but rather a title that a prudent, educated buyer in the reasonable course of business would accept. For real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
practitioners, the most complete reference to title issues is found in the preprinted wording contained within an agreement/contract. If you cannot produce a clear title of deed
Deed
A deed is any legal instrument in writing which passes, or affirms or confirms something which passes, an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions sealed...
to the property then the prospective buyer should expect to lose in a specific performance
Specific performance
Specific performance is an order of a court which requires a party to perform a specific act, usually what is stated in a contract. It is an alternative to award/ for awarding damages, and is classed as an equitable remedy commonly used in the form of injunctive relief concerning confidential...
action. This is also known as a merchantable title which means that a title that is not perfect, but is considered acceptable to a reasonably well-informed buyer.
In the absence of an agreement to the contrary, there is an implied undertaking in the contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
that the vendor (person selling the property) has a marketable title. The contract typically provides that on failure of a vendor to deliver good and marketable title, the vendee (buyer) may rescind the contract and recover any deposit.
Merger
If a deed is delivered and it has no warranty of title, the buyer has no recourse because the deed supersedes the contract. This means that the initial contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
is no longer in effect.
Closing Date
Sellers only have to tender good and marketable title on the date the conveyance is executed (date of closing). So a seller may contract to sell property it does not currently possess. Liability will be imposed on the seller for breach only if the seller does not have good and marketable title on the date of closing.
* Defects that make title unmarketable
- Outstanding mortgages/liens
- Restrictive covenants
- Outstanding future interests of others in the property, i.e. a "reverter".
- Encumbrances
- Easements on the property
- Variations in the names of grantors and grantees
- Variations in the chain of titleChain of titleA chain of title is the sequence of historical transfers of title to a property. The "chain" runs from the present owner back to the original owner of the property. In situations where documentation of ownership is important, it is often necessary to reconstruct the chain of title...
- Outstanding dowerDowerDower or morning gift was a provision accorded by law to a wife for her support in the event that she should survive her husband...
interests. - Adverse possessionAdverse possessionAdverse possession is a process by which premises can change ownership. It is a common law concept concerning the title to real property . By adverse possession, title to another's real property can be acquired without compensation, by holding the property in a manner that conflicts with the true...
claims - Structural encroachmentStructural encroachmentA structural encroachment is a concept in American real property law, in which a piece of real property hangs from one property over the property line of another landowner's premises. The actual structure that encroaches might be a tree, bush, bay window, stairway, steps, stoop, garage, leaning...
s - Existing violations of equitable servitudes or covenants
- Zoning restriction violations
* Actions that do not defeat marketability
- Zoning restrictions (so long as there are no current violations of the restrictions)
- Other land use regulations