12.00 Marketable Title

12.00.1

In General

Marketable title is title that is free from reasonable doubt. Marketable title allows the record owner to hold the land in peace, free from liens, encumbrances, and title chain defects that could decrease market value at time of sale.

Courts in various jurisdictions have defined marketable title as follows:

  • A marketable title is one that is free from material defects and reasonably free from the threat of litigation.

  • Property is unmarketable, because the title materially differs from the one bargained for in the contract of sale.

  • "Unmarketability of the title" is an alleged or apparent matter affecting the title to the land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A or the insured mortgage to be released from the obligation to purchase by virtue of a contractual condition requiring the delivery of marketable title.

  • Courts have held the following to be material title defects sufficient to render title unmarketable:

    • incorrect spelling of names
    • misdescription of property
    • title acquired by adverse possession

  • Courts have held the following types of encumbrances to render property unmarketable:

    • easements;
    • unexpired leases;
    • unpaid taxes;
    • liens;
    • encroachments;
    • violation of a zoning ordinance; and,
    • hazardous waste contamination.

Property may be transferable, even though the title is unmarketable. Courts decide as a matter of law whether a title defect so limits or restricts property ownership.

Caveat: The contract of sale may contain an express or implied provision of marketability; and also require insurable title.

"A title as is free from reasonable doubt in law and in fact; not merely a title valid in fact, but one which readily can be sold or mortgaged to a reasonably prudent purchaser or mortgagee."

"A title acceptable to a reasonable purchaser, informed as to the facts and their legal meaning, willing to perform his contract, in the exercise of that prudence which business men usually bring to bear on such transactions."

"A title under which a purchaser may have quiet and peaceful enjoyment of the property."

"A title that is free, from material defects, or grave doubts, and reasonably free from litigation."

"A title not subject to such reasonable doubt as will create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person."

"A title free from reasonable doubt both as to matters of law and fact, at law and in equity."

Although an unmarketable title does not mean that the property cannot be transferred, it does mean that there are certain defects in the title which may limit or restrict its ownership, to such an extent that a purchaser cannot be forced to accept a title that is materially different from the one bargained for in the contract of sale.

Caveat: A marketable title is not necessarily the same as an insurable title.

12.00.2

Insuring Against Unmarketability Of Title

Loss or damage arising by reason of the "unmarketability of title." Is insured under all ALTA policies, with the exception of the 1970 (Form A) Owner's Policy. Coverage is subject to (1) policy exclusions, (2) Schedule B exceptions, and (3) policy conditions and stipulations.