Marketability of title - Next Generation Bar Exam

1. What is the effect of a visible easement known to the buyer on marketability in many jurisdictions?

   It may not render title unmarketable if it benefits the property or the buyer accepted it. Utility easements and visible beneficial easements are often excepted.

2. What remedy does a buyer have when the seller cannot deliver marketable title at closing?

   Rescission, damages, or specific performance with an abatement in price. The seller must have a reasonable time to cure, absent a time-of-the-essence clause.

3. What is marketable title?

   Title reasonably free from doubt, such that a prudent buyer would accept it. It need not be perfect, but must not expose the buyer to a reasonable risk of litigation.

4. A seller's contract calls for marketable title, and the property is subject to an undisclosed restrictive covenant limiting use to single-family homes. What is the buyer's right at closing?

   To refuse to close, because the covenant renders title unmarketable. Undisclosed restrictive covenants are encumbrances.

5. What is the difference between marketable title and insurable title?

   Marketable title is free from reasonable doubt; insurable title is title an insurer will cover despite defects. A contract may require only insurable title.

6. What is the effect of a mortgage that the seller will pay off at closing on marketable title?

   It does not render title unmarketable. The seller may use the sale proceeds to discharge the mortgage at closing.

7. What are common defects that render title unmarketable?

   Undisclosed encumbrances, defects in the chain of title, and adverse possession claims. Examples include mortgages, liens, easements, and restrictive covenants not excepted in the contract.

8. When must a seller's title be marketable under a land sale contract?

   At closing. A buyer generally cannot rescind before closing because title is defective earlier.

9. What is the significance of a title acquired solely by adverse possession on marketability?

   It is generally unmarketable until established by a quiet title judgment. The buyer should not be forced to litigate the adverse possession claim.

10. What is the effect of a zoning violation on marketability of title?

    An existing violation of a zoning ordinance generally renders title unmarketable. The mere existence of zoning restrictions does not.

11. The buyer's title search reveals a garage that encroaches two feet onto the neighbor's land. What is the effect on marketability?

    It renders title unmarketable. A significant encroachment exposes the buyer to litigation.

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