Marketable title (
real estate
Real estate is 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 (also) an item of real property, (more general ...
) 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
Real estate is 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 (also) an item of real property, (more general ...
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
In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring ...
to the property then the prospective buyer should expect to lose in a
specific performance
Specific performance is an equitable remedy in the law of contract, whereby a court issues an order requiring a party to perform a specific act, such as to complete performance of the contract. It is typically available in the sale of land law, ...
action.
Merchantable title and marketable title are synonymous terms.
In the absence of an agreement to the contrary, there is an implied undertaking in the
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
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
In common law jurisdictions, an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warr ...
, the buyer has no recourse because the deed supersedes the contract. This means that the initial
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
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
A reversion in property law is a future interest that is retained by the grantor after the conveyance of an estate of a lesser quantum that he has (such as the owner of a fee simple granting a life estate or a leasehold estate). Once the lesser e ...
".
# Encumbrances
#
Easements
An easement is a nonpossessory right to use and/or enter onto the real property of another without possessing it. It is "best typified in the right of way which one landowner, A, may enjoy over the land of another, B". An easement is a property ...
on the property
# Variations in the names of grantors and grantees
# Variations in the
chain of title
A chain of title is the sequence of historical transfers of title to a property. It is a valuable tool to identify and document past owners of a property and serves as a property's historical ownership timeline. The "chain" runs from the present o ...
# Outstanding
dower
Dower is a provision accorded traditionally by a husband or his family, to a wife for her support should she become widowed. It was settled on the bride (being gifted into trust) by agreement at the time of the wedding, or as provided by law.
...
interests.
#
Adverse possession
Adverse possession, sometimes colloquially described as "squatter's rights", is a legal principle in the Common law, Anglo-American common law under which a person who does not have title (property), legal title to a piece of property—usuall ...
claims
#
Structural encroachment
A structural encroachment is a concept in real property law, in which a piece of real property projects from one property over or under the property line of another landowner's premises. The actual structure that encroaches might be a tree, bush, ...
s
# Existing violations of an
equitable servitude
An equitable servitude is a term used in the law of real property to describe a nonpossessory interest in land that operates much like a covenant running with the land. In England and Wales the term is defunct and in Scotland it has very lon ...
or
covenant
Covenant may refer to:
Religion
* Covenant (religion), a formal alliance or agreement made by God with a religious community or with humanity in general
** Covenant (biblical), in the Hebrew Bible
** Covenant in Mormonism, a sacred agreement b ...
# 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
Real property law
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