- The buyer's attorney asserts that the seller's title is unmarketable. What is the strongest reason supporting this assertion? Select one.
Answer: The neighbor has a strong claim for an easement by necessity across the property, creating a risk of litigation.
The correct answer is B. An easement is an encumbrance that can render title unmarketable. When a grantor sells a landlocked parcel, an easement by necessity is implied over the grantor's remaining lands to provide access. The neighbor has a very strong legal claim for such an easement, and the existence of this claim, which carries a high probability of success in litigation, makes the seller's title unmarketable. A is a plausible but weaker argument; establishing a prescriptive easement requires showing the use was adverse. Here, the facts are more clearly aligned with an easement by necessity, which does not require adversity and is a more direct consequence of the original sale. C is incorrect because this is a title issue, not a physical defect with the property. D is incorrect; while the buyer's observation might be relevant under a recording act for priority, it does not waive the buyer's right to receive marketable title from the seller as promised in the contract. A buyer is not required to accept known title defects unless they agree to do so in the contract.
- Is the seller's title marketable? Select one.
Answer: No, because the buyer owns only a one-half interest as a tenant in common and cannot convey the entire fee simple.
The correct answer is D. The conveyance by the daughter (a joint tenant) of her interest to the buyer severed the joint tenancy. The buyer and the son now hold the property as tenants in common, each with a one-half undivided interest. The buyer (now the seller) contracted to sell the entire fee simple to the new purchaser, but he only owns a one-half interest. He cannot deliver marketable title to the entire property because he does not own it. A is a correct statement of the legal effect of the daughter's conveyance but leads to the wrong conclusion; owning a half-interest does not allow one to convey marketable title to the whole. B is irrelevant to the question of what interest the buyer owns. C is incorrect because a joint tenant is free to convey their interest without the consent of the other joint tenants.
- The buyer wants to rescind the contract, claiming the title is unmarketable. Is the buyer likely to prevail? Select one.
Answer: Yes, because the procedural defect in the tax sale creates a significant risk that the sale could be voided, subjecting the buyer to litigation.
The correct answer is A. Marketable title is title free from reasonable doubt and the threat of litigation. A defect in a prior judicial or quasi-judicial proceeding, such as a tax foreclosure sale, can render title unmarketable. The failure to provide proper notice to a party with an interest in the property (like a lienholder) is a significant procedural defect that could allow that party to challenge and potentially overturn the sale. This creates an unacceptable risk of litigation for the buyer, making the title unmarketable. B is an overstatement; a properly conducted tax sale can produce marketable title. C is incorrect because the government's authority is contingent on following proper procedure; failure to do so undermines the validity of the sale. D is incorrect because a lienholder has a property interest protected by due process, and failure to provide notice to them can void the sale's effect on their lien, thus clouding the title.
- Is the seller's title unmarketable due to the racial covenant? Select one.
Answer: No, because the covenant is void and unenforceable as a violation of the Fourteenth Amendment and the Fair Housing Act.
When evaluating marketable title, you need to distinguish between encumbrances that actually affect the property's use and transfer versus those that are legally void and unenforceable. The key principle is that unenforceable restrictions don't render title unmarketable.
The racial covenant here, recorded in 1940, violates both the Equal Protection Clause of the Fourteenth Amendment and federal fair housing laws. Courts have consistently held that racially restrictive covenants are void and unenforceable as violations of public policy. Since this covenant cannot be legally enforced against anyone, it doesn't create a meaningful encumbrance on the title. The seller can convey marketable title because no court would enforce this discriminatory restriction.
Answer A is wrong because not all restrictive covenants make title unmarketable—only enforceable ones that actually restrict the buyer's use or future transfer of the property. Answer C incorrectly focuses on the covenant being "offensive" rather than the legal test of enforceability. While the covenant is morally reprehensible, marketable title doctrine looks at legal enforceability, not offensiveness. Answer D misunderstands standing principles—the buyer's membership in the restricted class is irrelevant to whether the covenant affects marketability, and buyers generally have standing to challenge title defects regardless of their personal characteristics.
Remember this pattern: on title questions involving discriminatory restrictions, focus on enforceability rather than mere presence in the chain of title. Void restrictions don't impair marketability, even if they remain in the recorded documents.
- The buyer claims that the potential lack of corporate authority for the 40-year-old deed renders the current seller's title unmarketable. What is the seller's best defense against this claim? Select one.
Answer: The statute of limitations for challenging a corporate action has long since expired, removing any threat of litigation.
When you encounter title defects involving old corporate deeds, focus on whether there's any realistic threat of future challenge to the title. Marketable title requires that a reasonable buyer wouldn't face litigation risk, not that every historical formality was perfectly documented.
The seller's strongest argument is that the statute of limitations for challenging corporate actions has expired (B). Most jurisdictions impose time limits on challenging corporate transactions, typically ranging from 2-7 years. After 40 years, any potential claim that the corporation lacked authority to convey the property is time-barred. Since no one can successfully challenge the deed's validity in court, there's no realistic litigation threat, making the title marketable despite the missing documentation.
Choice (A) is incorrect because title insurance doesn't cure marketability defects—it only provides financial protection against covered losses. The title must be marketable at closing regardless of insurance. Choice (C) misapplies ancient document rules, which create presumptions about authenticity and proper execution of old documents, but don't specifically address corporate authority issues. The presumption might help but isn't as strong as the statute of limitations defense. Choice (D) is wrong because corporate dissolution doesn't automatically validate prior unauthorized acts—shareholders or creditors might still have standing to challenge transactions in some circumstances.
Remember this pattern: when analyzing old title defects, always consider whether statutes of limitations have eliminated any realistic chance of successful challenge. Time-barred claims generally don't render title unmarketable, even if the underlying documentation is imperfect.
- The buyer now wishes to rescind the contract. Is the buyer likely to succeed? Select one.
Answer: Yes, because title acquired by adverse possession is inherently unmarketable until it is established by a judicial decree.
The correct answer is A. Every contract for the sale of land contains an implied covenant that the seller will provide marketable title at closing. Marketable title is title reasonably free from doubt and the threat of litigation. While title acquired by adverse possession is legally valid once all elements are met, it is not considered marketable until the adverse possessor obtains a judicial decree quieting title. Without such a decree, the buyer would have difficulty proving ownership to a subsequent purchaser and would face an unreasonable risk of litigation from the prior record owner. Therefore, the seller cannot deliver marketable title, and the buyer may rescind the contract. B is incorrect because the prior owner's ability to sue may be barred by the statute of limitations, but the title remains unmarketable due to the lack of judicial confirmation. C is incorrect because even if the seller's title is valid, it is not marketable without a quiet title judgment. D is incorrect because the covenant of marketable title is implied in all land sale contracts unless expressly waived.
- Is the seller's title marketable? Select one.
Answer: No, because the undischarged mortgage remains a cloud on the title, even if enforcement is time-barred.
The correct answer is C. Marketable title must be free from encumbrances of record. An undischarged mortgage, even if likely unenforceable due to the expiration of the statute of limitations, constitutes a cloud on the title. A buyer is not required to accept a title that may require a future quiet title action to clear the record. The risk that a court might find the statute of limitations was tolled or that the mortgage is still valid is sufficient to render the title unmarketable. A is incorrect because while the lien may be unenforceable, its presence on the public record still makes the title unmarketable. B is incorrect because a seller's self-serving affidavit is not a legally sufficient substitute for a recorded release or a court order clearing the title. D is too absolute; a quiet title action could also clear the encumbrance, but the seller must deliver title that is already marketable at closing, not title that can be made marketable through litigation.
- What is the buyer's best argument for rescinding the contract? Select one.
Answer: The seller's title is unmarketable because the possibility of reverter is an encumbrance that could cause the buyer to forfeit the property.
The correct answer is A. The seller has promised marketable title. A title is unmarketable if it is subject to an encumbrance or a risk of forfeiture. A fee simple determinable is a defeasible fee, subject to a future interest (a possibility of reverter). This future interest is an encumbrance that makes the title unmarketable because it imposes a restriction on the use of the land and creates a risk that the buyer could lose title entirely if the condition is breached. B is also true, as a fee simple determinable is not a fee simple absolute, but A is the better answer because it focuses on the effect of the future interest as an encumbrance making the title unmarketable, which is the core concept. C is incorrect; such use restrictions are generally valid. D is incorrect because the buyer's current intention is irrelevant to the marketability of the title; the title itself is defective because of the future risk of forfeiture, regardless of the buyer's plans.
- What is the legal status of the seller's title? Select one.
Answer: The title is unmarketable because the existing lease is an encumbrance that was not provided for in the contract.
When you encounter a real estate question about marketable title, focus on whether any encumbrances exist that weren't addressed in the contract. Marketable title means title that's free from reasonable doubt and can be sold to a reasonably prudent buyer without litigation risk.
The correct answer is D because an existing lease creates an encumbrance on the property that affects the buyer's rights. Even though the contract doesn't mention the lease, this doesn't eliminate its legal effect. The tenant has possessory rights that will transfer with the property, limiting the new owner's immediate control. Since the contract requires marketable title but doesn't account for this encumbrance, the title is unmarketable.
Answer A is wrong because the duration or terminability of the lease doesn't eliminate its status as an encumbrance. A month-to-month tenancy still grants the tenant legal rights that encumber the property until properly terminated.
Answer B incorrectly suggests that the buyer's future intentions affect the title's marketability. Marketable title is determined objectively based on existing encumbrances, not the buyer's subjective plans or preferences.
Answer C is incorrect because the tenant's willingness to sign a new lease is irrelevant to the current title's marketability. The existing lease already creates an encumbrance, and the title's status is determined at the time of the title examination, not based on future contingencies.
Remember: Any existing lease or tenancy creates an encumbrance that affects marketable title unless specifically addressed in the sales contract. The buyer's intentions don't cure title defects.
- The buyer claims the title is unmarketable due to the violation of the setback ordinance. Is the buyer's claim likely to succeed? Select one.
Answer: No, because the house was built before the zoning ordinance was enacted, making it a legal nonconforming use.
The correct answer is C. While an existing violation of a zoning ordinance typically renders title unmarketable, this structure does not violate the ordinance because it was constructed before the ordinance was passed. Such uses are 'grandfathered in' and considered legal nonconforming uses. As such, there is no violation, and the city cannot bring an enforcement action. The title is therefore marketable. A is a correct statement of the general rule but misapplies it to these facts. B is incorrect because the city has no legal basis to enforce the ordinance against this pre-existing structure. D is also a correct statement of law but is less precise than C; the key issue here is not the mere existence of the ordinance, but the fact that the structure is a legal nonconforming use, which resolves the potential violation issue.
- Can the buyer successfully claim that the seller's title is unmarketable? Select one.
Answer: No, because a shortage of acreage is a breach of contract issue, not a title marketability issue.
The correct answer is D. This question tests the distinction between a defect in title and a breach of other contract terms. Marketable title relates to the quality of the seller's ownership and freedom from encumbrances and litigation risk. Here, the seller has perfect, marketable title to the 92 acres he owns. The problem is that he contracted to sell 100 acres. This is a breach of the contract's property description clause, for which the buyer may have remedies like specific performance with an abatement in price or rescission. However, it is not a title defect. The title to the land the seller does own is marketable. A and B are incorrect because they mischaracterize the issue as one of title marketability. C is incorrect because while the specific description might control in a deed interpretation dispute, it doesn't excuse the seller's breach of the sales contract, which promised 100 acres.
- Which of the following statements most accurately describes the status of the seller's title? Select one.
Answer: The title is unmarketable because the encroachment exposes the buyer to a risk of a forced removal and litigation.
The correct answer is C. An encroachment of a structure onto a neighboring property constitutes a title defect that renders the seller's title unmarketable. This is because the buyer would be exposed to the risk of litigation from the neighbor, who could seek damages or an injunction forcing the removal of the encroaching structure. The buyer is not required to accept such a risk. A is incorrect because even a seemingly minor encroachment can lead to litigation, making title unmarketable; there is no widely accepted 'de minimis' exception. B is incorrect because the neighbor's silence does not constitute legal consent or waiver of their property rights, especially since the time period is far short of that required for adverse possession or an easement by prescription. D is incorrect because the marketability of title is determined by the existence of the defect and the associated risk of litigation, not by whether a formal objection has yet been made.
- The buyer wishes to terminate her contract, claiming the seller's title is unmarketable. Is the buyer's claim valid? Select one.
Answer: Yes, because the existence of a prior executory contract to sell the property creates a risk of litigation from the other purchaser.
The correct answer is A. Marketable title is title that is free from the reasonable probability of litigation. The existence of a prior, potentially valid contract to sell the same property, even if unrecorded, exposes the current buyer to the risk of a lawsuit for specific performance from the prior purchaser. The buyer is not required to accept this risk and 'buy a lawsuit.' Therefore, the title is unmarketable. B is also true, as the prior buyer has an equitable conversion interest, but A is the better answer as it focuses on the practical consequence—the risk of litigation—which is the core test of marketability. C is incorrect because even if the buyer might ultimately prevail under the recording statute, the need to litigate the issue to establish priority makes the title unmarketable. D is incorrect because the seller's mere assurance is not legally sufficient to remove the cloud on title created by the prior contract.
- The buyer now seeks to rescind the contract on the grounds that title is unmarketable. What is the most likely outcome? Select one.
Answer: The buyer will succeed, because one spouse cannot convey property held as tenants by the entirety without the other's joinder.
The correct answer is A. In a tenancy by the entirety, neither spouse can unilaterally convey or encumber the property. Any conveyance requires the signature of both spouses. Because the seller-husband alone signed the contract, he does not have the legal ability to convey the entire title as promised. Therefore, he cannot deliver marketable title. The buyer can rescind the contract based on this incurable title defect. B is incorrect because the buyer does not have to wait for an affirmative refusal; the title is unmarketable from the moment the contract is signed by only one spouse. C is incorrect because the Statute of Frauds requires a contract for the sale of land to be in writing and signed by the party to be charged; implied consent is insufficient. D is incorrect because this is not considered a curable defect in the same way as, for example, paying off a mortgage lien. The seller has contracted to do something he has no legal power to do alone, and he cannot compel his wife to sign. The buyer can rescind immediately.
- The buyer of Lot 2 discovers the mandatory arbitration clause and claims the title is unmarketable. Is the buyer's claim correct? Select one.
Answer: No, because the arbitration clause is a procedural rule, not an encumbrance that affects the title to the land itself.
This question tests your understanding of marketable title and what constitutes an encumbrance that renders title unmarketable. When evaluating title marketability, you need to distinguish between restrictions that affect the land's use versus procedural mechanisms that don't impact the property itself.
The correct answer is D because the mandatory arbitration clause is purely procedural—it dictates how disputes about the covenants must be resolved, but it doesn't restrict how the land can be used, developed, or transferred. The clause doesn't create any physical limitations on the property or affect the buyer's ownership rights in the land itself. It's simply a dispute resolution mechanism that operates separately from the title.
Answer A is wrong because while arbitration clauses might be uncommon in some contexts, the mere fact that a servitude is "unusual" doesn't automatically make title unmarketable. The key is whether it materially affects the property's use or value.
Answer B incorrectly assumes that limiting court access creates unmarketable title. However, parties can contractually agree to alternative dispute resolution methods, and this procedural limitation doesn't constitute a title defect.
Answer C makes the right conclusion but for the wrong reason. The uniformity of application across all lots is irrelevant to marketability analysis. A restriction applied uniformly could still render title unmarketable if it materially impaired the property.
Study tip: Remember that marketable title issues arise from encumbrances that affect the land's use, value, or transferability—not from procedural rules about how disputes are handled. Focus on whether the restriction impacts the property itself versus how legal matters are resolved.
- Does the presence of the wild deed in the public records render the seller's title unmarketable? Select one.
Answer: Yes, because any recorded instrument purporting to convey title, even if invalid, creates a cloud on title that must be removed.
The correct answer is A. Marketable title must be reasonably free from doubt and the threat of litigation. A wild deed, while technically a nullity and outside the chain of title, is a recorded instrument that facially clouds the owner's title. A prudent buyer would not accept a title with such an instrument on the record, as it could lead to future complications or litigation, even if the litigation is likely to be unsuccessful. The seller is typically required to undertake a quiet title action to have the wild deed formally expunged from the records to deliver marketable title. B is incorrect because a wild deed, being outside the chain of title, does not provide constructive notice to subsequent purchasers and thus cannot give its grantee priority. C is incorrect because while the deed is legally a nullity, its practical effect is to create a cloud that makes the title unmarketable. D is an overstatement; while the seller's possession strengthens their position, the buyer should not be required to rely on proving adverse possession against a potential claimant in the future.
- What is the strongest basis for your client to claim the seller's title is unmarketable? Select one.
Answer: The existence of the restrictive covenant frustrates the buyer's intended use of the property, creating a title defect.
The correct answer is B. A private restrictive covenant is an encumbrance on title. If a covenant restricts the owner's ability to use the property for its intended and zoned purpose, it renders the title unmarketable. Here, the covenant for 'single-family residential use' directly prohibits the buyer's plan to build a hardware store. This frustration of the buyer's purpose is a classic example of an encumbrance that makes title unmarketable. A is incorrect because there is no legal uncertainty to resolve; a landowner must comply with both zoning and private covenants, and the more restrictive of the two controls. Here, the covenant is more restrictive. C is incorrect because a private covenant is not a government regulation; the mere existence of a zoning law is not a title defect, but a private covenant is. D is incorrect because failure to disclose may be a separate claim, but the core title issue is marketability, which does not depend on the seller's state of mind or disclosures.
- Does the zoning ordinance, which prevents the rebuilding of the legal nonconforming use, render the seller's title unmarketable? Select one.
Answer: No, because the mere existence of a zoning ordinance and its potential future impact does not constitute a title defect.
The correct answer is C. The covenant of marketable title protects a buyer from defects in the seller's title and existing encumbrances. It does not protect against government regulations, such as zoning ordinances, that may restrict the future use of the property, provided there is no existing violation. Here, the guesthouse is a legal nonconforming use, so there is no current violation. The ordinance's potential future effect (prohibiting rebuilding) is a legal risk related to land use regulation, not a cloud on the title itself. A buyer is expected to investigate and be satisfied with the current zoning regulations before purchasing. A and B are incorrect because impairment of value or use due to a valid, non-violated governmental regulation is not a title marketability issue. D is correct that there is no current violation, and C provides the broader, more complete reason why this does not create a title defect.
- What is the best advice to give your client regarding the title? Select one.
Answer: The title is unmarketable because the presence of the restrictive covenant exposes the buyer to a significant risk of litigation, regardless of its likely enforceability.
The correct answer is C. Marketable title is title reasonably free from the threat of litigation. A restrictive covenant that conflicts with the buyer's intended use of the property renders title unmarketable. Even if the seller believes the covenant is unenforceable due to changed conditions, this would have to be established in court. The mere existence of the covenant creates a cloud on the title and exposes the buyer to the risk of having to defend a lawsuit to have it declared unenforceable. This risk makes the title unmarketable. A is incorrect because zoning laws do not override private covenants; a landowner must comply with both. B is incorrect because the likelihood of unenforceability is not enough; the buyer is not required to 'buy a lawsuit.' D is incorrect because while the contract also requires insurable title, the marketability of title is an independent requirement. A title can be insurable but still unmarketable.
