- Is the buyer obligated to close, and why?
Answer: No, because title by adverse possession is not marketable of record and would expose the buyer to the burden of proving title in litigation.
Whenever you see a contract promising "marketable title," you're testing the distinction between legal title and title a reasonable buyer must accept. Marketable title must be free from reasonable doubt and proven from the record, not just by the seller's assertion. Here, the seller has 22 years of adverse possession, exceeding the 15-year statute, so she has valid legal title. However, because she has no deed or recorded chain of title, the buyer cannot verify her ownership without litigating. The correct answer is the one that says "No, because title by adverse possession is not marketable of record and would expose the buyer to the burden of proving title in litigation." The title is good, but it is not marketable, and forcing the buyer to accept it shifts the risk of litigation onto the buyer.
Now, examine the wrong answers. The choice saying "title by adverse possession can never be conveyed, as a seller cannot transfer what the true record owner holds" is incorrect because adverse possession extinguishes the record owner's title; the possessor can convey her title, but the problem is lack of record evidence, not transferability. The choice saying "Yes, because title by adverse possession is a valid legal title once the statute has run, and the seller's 22-year possession is conclusive proof of it" misstates the law – valid title does not equal marketable title, and "conclusive proof" is what the buyer lacks. Finally, the choice saying "Yes, because the buyer's obligation to close depends only on physical possession and the seller's ability to deliver possession at closing" is wrong because marketable title requires record title, not just possession; possession doesn't cure the title defect.
Study tip: Remember that "marketable title" is a record-based concept. A seller with adverse possession has a valid claim, but it is unmarketable because the buyer would have to prove it in court. Watch for this trap – the exam loves to test that legal title is not the same as marketable title.
- Which of the following is the most accurate statement of the buyer's position?
Answer: The buyer must close because an unenforceable restriction does not create a reasonable doubt about title and therefore does not render title unmarketable.
Whenever you see a marketable-title question, focus on whether a reasonable purchaser would face a genuine risk of litigation or loss, not on whether the record contains imperfections. Here, the recorded covenant would normally be a concern, but a final court judgment held it unenforceable because it was adopted as part of a racially discriminatory scheme. That judgment is public record and eliminates the covenant's legal effect. Because an unenforceable restriction cannot create a reasonable doubt about title, the buyer must close.
The choice saying the covenant remains in the chain of title and a reasonable purchaser would not accept a title requiring reliance on a court judgment is wrong: recorded court judgments routinely remove restrictions, and relying on them is not the kind of doubt that makes title unmarketable. The choice saying any recorded covenant purporting to restrict use renders title unmarketable until removed is too broad — only enforceable restrictions matter. And the choice saying the buyer cannot be required to accept property burdened by a restriction that cannot be eliminated confuses a void document with a real burden; since the covenant is unenforceable, there is no burden to eliminate.
Study tip: distinguish record clutter from title defects. If the restriction is void, it does not cloud title. Ask whether a reasonable buyer would have a substantial risk of suit — if not, the title is marketable.
- Is the buyer's refusal justified?
Answer: Yes, because an easement that is not visible and of which the buyer had no actual knowledge at the time of contracting is an encumbrance that creates reasonable doubt and renders title unmarketable.
Whenever a sale contract requires marketable title, focus on whether the title is free from encumbrances that would create reasonable doubt in a prudent buyer. An easement is such an encumbrance even if it leaves no surface trace. Here, the city's recorded right to install, maintain, and repair underground pipes across the lot gives a third party ongoing access to the property. Because the line is entirely underground and the buyer did not actually know of the easementat signing, he never agreed to accept this burden; discovering it later in the title report does not make the title marketable. His refusal is therefore justified.
The blanket idea that utility easements are presumed within every purchaser's contemplation goes too far; common burdens may be acceptable when known/visible, but an invisible, unknown easement can create risk of future entry, excavation, and litigation. Likewise, it is no answer that the easement does not occupy above-ground improvements or prevent the buyer's intended use; marketability concerns title risk, and the utility's right to dig/maintain can interfere with many uses. Finally, the claim that any recorded easement automatically renders title unmarketable unless the contract expressly says "subject to existing easements"is overbroad; visible or known encumbrances may be accepted or may not create reasonable doubt, and the standard is reasonable doubt, not a bright-line rule.
Study tip: at signing, ask whether the buyer observed or actually knew of the encumbrance. If not, a recorded hidden encumbrance generally justifies refusal; if yes, the buyer likely took subject to it.
- Which of the following is the most accurate statement regarding the seller's proposed cure?
Answer: The seller's waiver offer is insufficient because it is limited to the current dwelling and does not run with the land, so a future owner would remain exposed to enforcement for the existing violation.
When you see a marketability-of-title question, remember that the seller's obligation is measured at closing, not by what the buyer knew when signing. A title is unmarketable if it exposes the owner to litigation or reasonable doubt, and a recorded building restriction that has been violated ordinarily makes title unmarketable.
The seller's proposed cure fails for a simple reason: theomeowners' association waiver applies only to the current dwelling and does not run with the land. That leaves a future purchaser — and therefore the buyer as a future seller — exposed to enforcement of the restriction for the existing second dwelling unit. Because marketable title must be marketable to future owners, not just the immediate buyer, this personal, non-assignable waiver does not remove the title defect.
The buyer's knowledge of the restriction before signing does not waive the right to insist on marketable title; knowing about a defect is not the same as agreeing to accept it, so that rationale is insufficient. Similarly, while a valid waiver can sometimes cure a violation, it must actually run with the land or otherwise bind future owners; the buyer is not required to accept just any offer that purportedly reduces risk. Finally, the suggestion that the waiver is ineffective unless signed by every lot owner is too absolute: a homeowners' association may be authorized to grant effective waivers under the declaration, so universal owner signatures are not automatically required. The real test is whether the cure eliminates the exposure for succeeding owners.
For marketability problems, ask: does this cure bind only the current party, or does it travel with the land? If it does not run with the land, it is usually not enough.
- Which of the following is the most accurate statement regarding the buyer's obligation to close?
Answer: The buyer must close because a visible encroachment does not render title unmarketable; the buyer is charged with notice of what is apparent on the ground.
Whenever you see a marketable-title question, ask whether the alleged defect is hidden or visible. A title is marketable if it is free from reasonable doubt, but it need not be perfect. Here, the driveway encroachment was plainly visible for over 20 years. Because the buyer was charged with notice of what appears on the ground, he cannot later claim that the visible encroachment casts reasonable doubt on title. The mere possibility that the neighbor has acquired prescriptive rights doesn't make the title unmarketable; the buyer contracted knowing the property's physical condition.
The statement that the buyer must close only if the neighbor gives a written acknowledgment of permissive use is wrong—that would be a possible cure for a hidden encroachment, but this one was not hidden. Likewise, the broad claim that any third-party encroachment creates reasonable doubt goes too far; a minor, visible encroachment is not a title defect. And the suggestion that the seller cannot convey record title because of a possible prescriptive easement confuses a physical condition with a title defect—the seller can convey whatever record title he has, and the buyer's visible knowledge bars a marketability objection.
Remember: visible encroachments are assumed to be accepted by the buyer. On the exam, separate hidden title defects from open-and-notorious physical conditions.
- Which of the following is the most accurate statement of the parties' rights?
Answer: The seller may require the buyer to close because title need be marketable only at closing, and a seller may discharge a mortgage out of the closing proceeds so long as the release is tendered with the deed.
Whenever you see a marketable-title question, remember the key timing rule: marketability is judged at closing, not when the contract is signed. A title is marketable if the seller can tender, at closing, a title free from reasonable doubt — and a mortgage that will be paid off and released out of closing proceeds does not make title unmarketable. So here, the buyer must close if the seller is ready to use part of the purchase price to discharge the recorded mortgage and tender the release with the deed. The buyer cannot refuse merely because the mortgage was on record before closing; what matters is the condition of title at the moment of delivery.
The statement that the buyer may refuse because marketability is determined at the contract date misstates the law — defects existing at contract date can be cured by closing. Likewise, the worry that the title company might fail to obtain the discharge is not a valid objection; the seller's obligation is to tender marketable title at closing, and the buyer need not accept a speculative risk if the seller actually performs. Finally, the claim that a purchase-money mortgage is never deemed an encumbrance is both overbroad and irrelevant — this was a pre-existing mortgage, not a purchase-money mortgage, and any mortgage remaining of record would ordinarily make title unmarketable.
Study tip: on real-property questions, separate the "what exists now" from "what will exist at closing." Temporary clouds that can be cleared by the seller at closing usually do not justify the buyer's refusal to perform.
- Which of the following is the most accurate statement of Buyer's rights?
Answer: Buyer may not recover on the contract claim, but Buyer may sue on the covenants of the warranty deed for the cost of clearing the lien.
When you see a real estate transaction with both a contract and a deed, think about the doctrine of merger: at closing, the contract merges into the deed. That means the buyer's rights are generally limited to the covenants in the deed, not the contract's marketable-title promise. Here, the unreleased mortgage is an encumbrance on the title. The warranty deed Seller delivered includes a covenant against encumbrances, which is breached at the moment of delivery—regardless of whether Seller knew about the mortgage or whether it was in default. So Buyer can recover the cost of obtaining a release by suing on that covenant, but not on the contract claim because the contract is gone after closing.
The first wrong answer, "Buyer may recover because the recorded mortgage rendered Seller's title unmarketable and the contract promise was breached at closing," ignores merger—the contract promise does not survive the deed. The third, "only if Seller knew and intentionally concealed it," misstates the law: the covenant against encumbrances is strict liability, not knowledge-based. The fourth, "unless the unreleased mortgage was in default," is also wrong—a paid but unreleased mortgage still creates a cloud on title and breaches the covenant. The correct answer is the one that distinguishes the contract claim from the deed covenants.
Study tip: Whenever both a purchase contract and a deed appear, check for merger. Ask yourself: "What did the deed warrant?" That will often point you to the correct remedy.
- Which of the following best states the buyer's right with respect to the covenant?
Answer: The buyer must close because a covenant that does not interfere with the buyer's actual intended use does not create a reasonable doubt as to the title's validity.
This question tests the distinction between an encumbrance and a marketable title defect. Under the marketable title doctrine, a title is unmarketable if a reasonable purchaser, aware of the facts, would be exposed to litigation or substantial risk. A recorded covenant is an encumbrance, but it only renders title unmarketable if it materially interferes with the buyer's intended or reasonable use. Here, the covenant restricts use to single-family residential purposes, and the buyer's intended use is precisely that. Because the restriction does not impede the buyer's plans, it creates no reasonable doubt about the title's validity, so the buyer must close.
The choice stating that any recorded covenant restricting the use of property is an encumbrance that makes title unmarketable is overbroad; not every restriction creates a defect, only those that hinder the buyer's use or expose them to suit. The choice arguing the covenant could be enforced against future owners misstates the test—marketability is judged at closing based on the buyer's current intended use, not speculative future violations. Finally, the choice claiming the buyer waived any objection due to actual knowledge is incorrect; knowledge of a covenant does not waive a genuine marketability objection, but here no such objection exists because the use complies.
On the exam, when you see a covenant and marketability, ask: Does the restriction block the buyer's stated or planned use? If it does not, the buyer must close. If it does, the title is unmarketable.
- Which of the following is the most accurate characterization of the seller's title?
Answer: The title is unmarketable because the chain of title has a missing link and the gap creates a reasonable doubt that the seller owns the property.
Whenever you see a marketable-title question, remember that the issue is not just actual ownership—it is whether a reasonable purchaser, examining the record, would be forced to litigate over the title. Here the recorded chain is Owner → Adams (1998), Brown → Carr (2001), Carr → seller (2002), but there is no Adams → Brown deed. That missing link is a visible gap in the chain of title. A buyer cannot verify how Brown ever acquired the property, so the seller's title is unmarketable because the gap creates a reasonable doubt that the seller owns the property.
The choice saying the title is marketable because the 30-year search reveals no recorded defect ignores that the missing link is itself the defect; Carr's one year of record title does not cure it. The choice limiting unmarketability to a late-recorded wild deed is backwards: if the Adams-to-Brown deed were recorded before Brown-to-Carr, the chain would actually be complete. The choice claiming Brown's recorded deed cures the prior absence of a link misunderstands recording—a deed can be recorded, but without a connecting grantor it hangs in the air, and a purchaser must search the whole chain forward from the root of title, not ignore an unconnected deed.
Study tip: draw the chain whenever you see recording facts. A broken link between any two deeds makes title unmarketable, even if the current deed is recorded.
- Which of the following is the most accurate statement of the buyer's rights?
Answer: The buyer may refuse to close because the dock's violation of the recorded easement exposes the buyer to a substantial risk of enforcement and renders the title unmarketable.
Whenever you see a buyer refusing to close because of a title defect, focus on marketable title. A title is unmarketable if it exposes the buyer to a substantial risk of litigation or enforcement. Here, a recorded conservation easement prohibits construction within 50 feet of the waterline, and the existing dock violates it by 12 feet. The seller offered no evidence of a cure or waiver, so you face a real risk that the state will enforce the easement, potentially forcing dock removal. That risk makes the title unmarketable, so you may refuse to close.
The choice saying you must close because you had record notice is wrong—record notice does not excuse a known violation; it simply tells you the easement exists. The violation itself, regardless of physical size, is a title defect. The choice requiring you to prove the state actually threatened enforcement is also wrong; marketability is judged by reasonable risk, not actual threat. The choice limiting refusal to physical interference with the setback is flawed too—the defect is the violation of the easement, not the degree of interference. Even if you could still use the land, the legal risk is enough.
Remember: a recorded restriction that is violated makes title unmarketable unless the seller proves it was cured or waived. Don't wait for an actual lawsuit—the risk is sufficient.
- Which of the following is the most accurate statement of the law applicable to the buyer's claim?
Answer: The buyer's claim succeeds because the grantor retained a right of entry, an enforceable future interest that renders the title unmarketable.
When you see a deed with conditional language, your first job is to classify the future interest—that classification drives marketability. Here, the clause "if they cease to be so used, the grantor or his heirs may re-enter and terminate" explicitly grants the grantor a right of entry (power of termination). This makes the seller's estate a fee simple subject to condition subsequent. A right of entry is a present, enforceable future interest that allows the holder to reclaim the property upon breach. It is a genuine encumbrance on title, so a reasonable buyer cannot be forced to accept it—even if the buyer currently plans to continue the church use. The buyer's claim therefore succeeds.
The choice claiming the grantor's interest is a "mere possibility of reverter" is wrong on two counts: the "may re-enter" language creates a right of entry, not the automatic termination that accompanies a possibility of reverter (which arises from "so long as" alone). Even if it were a possibility of reverter, that interest is also an encumbrance, so it would not be "too remote."
The choice about the buyer's intent to continue the church use misses the point—marketability is judged objectively, from the standpoint of a reasonable purchaser, not the specific buyer's plans. The risk of future breach and litigation is enough.
Finally, the choice that says a use restriction is "always an encumbrance" is overbroad; zoning laws, for example, are not encumbrances. But here, the specific enforceable future interest is what matters.
Study tip: On the bar exam, distinguish a right of entry (explicit "re-enter" or "terminate" language) from a possibility of reverter (automatic termination). Both make title unmarketable, but you must label them correctly to pick the right answer.
