All questions
Question 1
A buyer contracted to purchase a parcel of land described in the agreement as 'Blackacre, as shown on Survey Map #123 filed in the county recorder's office.' The seller contracted to convey marketable title. The deed from the seller's grantor, which is in the recorded chain of title, contained a scrivener's error, describing the parcel as being located in 'Range 4 East' instead of the correct 'Range 5 East.' All subsequent deeds, including the one into the current seller, contain the correct description. The buyer discovered the error and seeks to avoid the contract.
- The buyer may avoid the contract because a defect in a prior deed in the chain of title renders title unmarketable. (correct answer)
- The buyer may avoid the contract only if there is evidence that a third party is making a claim to the property based on the error.
- The buyer may not avoid the contract because the error was corrected in subsequent deeds and does not create a reasonable probability of litigation.
- The buyer may not avoid the contract because the reference to the survey map in the purchase agreement cures any defect in the deed's legal description.
Explanation: Marketable title requires a chain of title free from defects that would subject a reasonable buyer to the risk of litigation. A significant error in the legal description in a deed within the chain of title, even if corrected in later deeds, creates a cloud on title. A court action, such as a suit to quiet title or for reformation of the deed, might be necessary to formally correct the record and eliminate any potential claim arising from the ambiguity. This potential need for litigation renders the title unmarketable. Choice A is correct. Choice B is incorrect because the mere risk of litigation, not an actual claim, is sufficient to make title unmarketable. Choice C is incorrect because the correction in subsequent deeds does not retroactively fix the defect in the earlier deed, leaving a gap or inconsistency in the record title. Choice D is incorrect; while the survey map helps identify the property, it does not cure the legal defect in the recorded chain of title.
Question 2
A buyer contracted to purchase a parcel of land described in the agreement as 'Blackacre, as shown on Survey Map #123 filed in the county recorder's office.' The seller contracted to convey marketable title. The deed from the seller's grantor, which is in the recorded chain of title, contained a scrivener's error, describing the parcel as being located in 'Range 4 East' instead of the correct 'Range 5 East.' All subsequent deeds, including the one into the current seller, contain the correct description. The buyer discovered the error and seeks to avoid the contract.
- The buyer may avoid the contract because a defect in a prior deed in the chain of title renders title unmarketable. (correct answer)
- The buyer may avoid the contract only if there is evidence that a third party is making a claim to the property based on the error.
- The buyer may not avoid the contract because the error was corrected in subsequent deeds and does not create a reasonable probability of litigation.
- The buyer may not avoid the contract because the reference to the survey map in the purchase agreement cures any defect in the deed's legal description.
Explanation: Marketable title requires a chain of title free from defects that would subject a reasonable buyer to the risk of litigation. A significant error in the legal description in a deed within the chain of title, even if corrected in later deeds, creates a cloud on title. A court action, such as a suit to quiet title or for reformation of the deed, might be necessary to formally correct the record and eliminate any potential claim arising from the ambiguity. This potential need for litigation renders the title unmarketable. Choice A is correct. Choice B is incorrect because the mere risk of litigation, not an actual claim, is sufficient to make title unmarketable. Choice C is incorrect because the correction in subsequent deeds does not retroactively fix the defect in the earlier deed, leaving a gap or inconsistency in the record title. Choice D is incorrect; while the survey map helps identify the property, it does not cure the legal defect in the recorded chain of title.
Question 3
A landowner has owned a tract of rural land for 25 years. Fifteen years ago, she perfected title to an adjacent five-acre parcel via open, notorious, continuous, and hostile possession for the jurisdiction's statutory period of 10 years. The landowner has never filed a quiet title action or otherwise had her adverse possession claim judicially confirmed. She recently contracted to sell the entire tract, including the five-acre parcel, to a developer. The contract requires her to deliver 'marketable title.' The developer's title search uncovered the facts regarding the adverse possession. The developer now refuses to close.
- The developer must close because the landowner's title through adverse possession is valid and cannot be challenged.
- The developer must close because the risk of a challenge from the prior owner is minimal after so many years.
- The developer may refuse to close because title acquired by adverse possession is not marketable until confirmed by a judicial proceeding. (correct answer)
- The developer may refuse to close only if the contract specifically required 'record title' rather than 'marketable title.'
Explanation: Title acquired by adverse possession, while valid, is not considered marketable title. This is because it is not established in the public records and would require the buyer to prove the facts of the adverse possession in court if challenged. To become marketable, the adverse possessor must file a quiet title action to obtain a judicial decree confirming their ownership. Without such a decree, the buyer would be purchasing the risk of litigation, which is the essence of unmarketable title. Therefore, the developer is entitled to rescind the contract. Choice C correctly states this rule. Choice A is wrong because while the title may be valid, it isn't marketable. Choice B is incorrect because marketability depends on the freedom from potential litigation, not a calculation of the odds of that litigation. Choice D is incorrect because the default requirement is marketable title, which adverse possession title does not satisfy without a court decree; specifying 'record title' is not necessary to reject it.
Question 4
A seller and a buyer entered into a purchase and sale agreement for a historic home. The contract specified that the seller would provide 'marketable and insurable title.' A title search revealed a restrictive covenant in the 1920 deed that prohibits the owner from altering the exterior facade of the home without approval from a now-defunct historical society. Due to the society's nonexistence, obtaining approval is impossible. A title insurance company has reviewed the covenant and agreed to issue a policy that insures against any financial loss resulting from its enforcement.
- The buyer must accept the title because the contract requires insurable title, and a title company is willing to issue a policy. (correct answer)
- The buyer may reject the title because the inability to comply with the covenant makes the title unmarketable.
- The buyer must accept the title because the covenant is likely unenforceable due to the nonexistence of the historical society.
- The buyer may reject the title because the covenant restricts the use of the property, which is a per se violation of marketability.
Explanation: When a contract specifies a different standard of title, such as 'insurable title,' that standard governs. Here, the contract requires both marketable and insurable title. While the title may be unmarketable because the covenant creates a risk of litigation or makes the property unalterable, it is insurable. The title company is willing to insure over the risk. Because the contract specified 'insurable title' as a required standard and that standard has been met, the buyer must accept the title. If the contract had only required 'marketable title,' the buyer could likely rescind. Choice A is correct because it recognizes that the 'insurable title' provision is controlling. Choice B is incorrect because the contract provided an alternative, which has been met. Choice C is speculative; while the covenant may be unenforceable, proving that would require litigation, which is the very risk that makes title unmarketable. Choice D is too broad; not all use restrictions render title unmarketable.
Question 5
A landowner has owned a tract of rural land for 25 years. Fifteen years ago, she perfected title to an adjacent five-acre parcel via open, notorious, continuous, and hostile possession for the jurisdiction's statutory period of 10 years. The landowner has never filed a quiet title action or otherwise had her adverse possession claim judicially confirmed. She recently contracted to sell the entire tract, including the five-acre parcel, to a developer. The contract requires her to deliver 'marketable title.' The developer's title search uncovered the facts regarding the adverse possession. The developer now refuses to close.
- The developer must close because the landowner's title through adverse possession is valid and cannot be challenged.
- The developer must close because the risk of a challenge from the prior owner is minimal after so many years.
- The developer may refuse to close because title acquired by adverse possession is not marketable until confirmed by a judicial proceeding. (correct answer)
- The developer may refuse to close only if the contract specifically required 'record title' rather than 'marketable title.'
Explanation: Title acquired by adverse possession, while valid, is not considered marketable title. This is because it is not established in the public records and would require the buyer to prove the facts of the adverse possession in court if challenged. To become marketable, the adverse possessor must file a quiet title action to obtain a judicial decree confirming their ownership. Without such a decree, the buyer would be purchasing the risk of litigation, which is the essence of unmarketable title. Therefore, the developer is entitled to rescind the contract. Choice C correctly states this rule. Choice A is wrong because while the title may be valid, it isn't marketable. Choice B is incorrect because marketability depends on the freedom from potential litigation, not a calculation of the odds of that litigation. Choice D is incorrect because the default requirement is marketable title, which adverse possession title does not satisfy without a court decree; specifying 'record title' is not necessary to reject it.
Question 6
A farmer contracted to sell his 100-acre farm to a buyer, promising to deliver marketable title. The contract described the farm by its street address and tax parcel number. A new survey ordered by the buyer revealed that the farm is actually 98 acres, not the 100 acres mentioned in preliminary discussions and marketing materials. The deed in the seller's chain of title correctly describes the 98-acre parcel by metes and bounds. The buyer now asserts the title is unmarketable due to the two-acre discrepancy.
- The title is unmarketable because the seller cannot deliver the quantity of land the buyer reasonably expected to receive.
- The title is unmarketable because the discrepancy in acreage creates a substantial risk of litigation with neighboring landowners.
- The title is marketable, but the buyer is entitled to an abatement of the purchase price proportional to the missing acreage.
- The title is marketable because a minor shortage in acreage that does not arise from a boundary dispute is not a title defect. (correct answer)
Explanation: When you encounter marketable title questions, focus on whether defects create a substantial risk that a reasonable buyer would face litigation or be unable to sell the property in the future. Minor practical issues that don't affect legal ownership typically don't render title unmarketable.
Here, the key facts are that the contract identified the property by street address and tax parcel number (not acreage), and the seller's deed correctly describes the actual 98-acre parcel by metes and bounds. Since the seller can deliver exactly what they legally own with clear title, and the acreage shortage stems from a measurement error rather than a boundary dispute or competing claim, this doesn't create a title defect.
Choice A is wrong because reasonable expectations about quantity don't determine marketability—only whether the seller can deliver clear legal title to the described property matters. The contract's identification method controls, not preliminary discussions about acreage.
Choice B is incorrect because there's no indication of an actual boundary dispute or competing claims from neighbors. A simple measurement discrepancy doesn't create litigation risk when the boundaries are clearly established by metes and bounds description.
Choice C misapplies the law by treating this as a title issue requiring price adjustment. While the buyer might have other remedies for the quantity shortage (like rescission or damages), the title itself remains marketable since there are no legal clouds or defects.
Remember: marketable title focuses on legal ownership certainty, not whether the property matches the buyer's practical expectations. Distinguish between title defects (which affect marketability) and performance issues (which may give other remedies but don't cloud title).
Question 7
You are representing a buyer who contracted to purchase a commercial building. The contract provides that the seller will convey marketable title by a general warranty deed. Before closing, your client discovers that a previous owner in the chain of title, a corporation, was dissolved for failing to pay franchise taxes two days before it executed the deed conveying the property to the next owner. The corporation was later reinstated. Your client is concerned about the validity of that conveyance.
- The title is marketable because the corporation was subsequently reinstated, which retroactively validated its prior acts.
- The title is marketable because the current seller is providing a general warranty deed, which protects the buyer against any such defects.
- The title is unmarketable because the deed from the dissolved corporation creates a doubt about the chain of title that requires clarification. (correct answer)
- The title is unmarketable only if the state statute governing corporate dissolution explicitly voids all conveyances made during dissolution.
Explanation: Marketable title must be free from reasonable doubt. A deed executed by a dissolved corporation raises a significant legal question about the validity of the conveyance and the authority of the individuals who signed the deed. Even if the corporation was later reinstated, and even if that reinstatement might retroactively validate the deed, these are legal and factual issues that could require litigation to resolve. A buyer is not required to 'buy a lawsuit.' The break or uncertainty in the chain of title is sufficient to render the title unmarketable. Choice C is the best answer. Choice A is a possible legal argument, but a buyer is not required to rely on it. Choice B is incorrect; the seller's promise of a warranty deed is a remedy for a future breach, it does not cure the unmarketable title before closing. Choice D is incorrect; the mere plausibility of a challenge is enough to make title unmarketable, even if the statute is not explicit.
Question 8
A seller and a buyer entered into a contract for the sale of a house. The contract required marketable title and set a closing date of June 1, with a 'time is of the essence' clause. On May 25, the buyer's title search revealed a valid judgment lien on the property for $20,000, filed against the seller two years prior. The seller has sufficient equity in the property to pay the lien from the sale proceeds. The buyer, having found another property they prefer, notified the seller on May 26 that they were terminating the contract because the lien made the title unmarketable.
- The buyer's termination was proper because the existence of the lien on May 26 rendered the title unmarketable.
- The buyer's termination was proper because the 'time is of the essence' clause requires title to be marketable at all times after the contract is signed.
- The buyer's termination was premature because a seller has the right to use the sale proceeds to clear title at the closing. (correct answer)
- The buyer's termination was premature because the lien was for less than the total purchase price of the property.
Explanation: The seller's obligation is to provide marketable title at the time of closing, not before. It is standard practice for sellers to use the proceeds of the sale to pay off existing mortgages and liens at the closing itself. As long as the purchase price is sufficient to cover the lien and the seller is prepared to do so, the title is not unmarketable. The buyer's anticipatory repudiation before the closing date was improper. Choice C is correct. Choice A is incorrect because the seller is not in breach until the closing date arrives and they fail to deliver marketable title. Choice B is incorrect; 'time is of the essence' relates to the performance on the closing date, not before. Choice D is incorrect because the amount of the lien relative to the price is not the determinative factor; the key is whether it can be satisfied from the proceeds at closing.
Question 9
Two individuals owned a parcel of land as joint tenants with right of survivorship. One of the joint tenants died, and the survivor contracted to sell the property. The contract requires the seller to deliver marketable title. The title search shows the recorded deed creating the joint tenancy. The buyer's attorney insists that the seller must provide a copy of the deceased joint tenant's death certificate and file an affidavit of survivorship in the land records before the title can be considered marketable.
- The attorney's demand is unreasonable because title passed automatically to the survivor by operation of law.
- The attorney's demand is reasonable because proof of death is required to establish the severance of the deceased tenant's interest on the record. (correct answer)
- The attorney's demand is unreasonable because the deed creating the joint tenancy provides sufficient notice of the right of survivorship.
- The attorney's demand is reasonable only if there is a dispute regarding the cause of death of the deceased joint tenant.
Explanation: Although the right of survivorship operates automatically upon the death of a joint tenant, the public record does not reflect this transfer of title. To provide marketable title, the seller must bridge this gap in the record by providing proof of the other joint tenant's death. This is typically done by recording a death certificate and/or an affidavit of survivorship. Without this, a future title examiner would not be able to confirm that the deceased tenant's interest was extinguished, creating a cloud on title. Therefore, the buyer's attorney is making a reasonable demand to ensure the chain of title is clear and unbroken in the record. Choice B is correct. Choices A and C are incorrect because while the transfer is automatic, marketability requires that the transfer be documented in the public record. Choice D is incorrect as the cause of death is irrelevant; the fact of death is what needs to be established in the record.
Question 10
A buyer contracted to purchase a large, wooded lot from a seller. The contract provides for conveyance of marketable title. Before closing, the buyer commissioned a survey which revealed that the seller's garage encroaches by five feet onto the neighboring property. The neighbor has not objected to the encroachment, which has existed for three years. The buyer seeks to terminate the contract based on this discovery.
- The buyer may terminate because an encroachment of the seller's property onto adjacent land renders title unmarketable. (correct answer)
- The buyer may not terminate because the encroachment is onto a neighbor's land, not from a neighbor onto the seller's land.
- The buyer may not terminate because the neighbor has not objected, implying consent or waiver of any claim.
- The buyer may not terminate because the encroachment is a physical condition of the property, not a defect in title.
Explanation: Title is unmarketable if it exposes the buyer to a significant risk of litigation. An encroachment of a structure from the seller's property onto a neighbor's land (an 'encroachment out') creates such a risk. The neighbor could sue the new owner for trespass or seek an injunction forcing the removal of the garage. Therefore, a significant encroachment renders the seller's title unmarketable. A five-foot encroachment by a permanent structure like a garage is significant. Choice A is the correct answer. Choice B is incorrect; both encroachments 'in' and 'out' can render title unmarketable. Choice C is incorrect because the neighbor's current silence does not eliminate their legal right to sue in the future. Choice D is incorrect because while it is a physical condition, it has title implications due to the potential for litigation and questions about the boundaries of the property being conveyed.
Question 11
A seller entered into a contract to sell a house to a buyer, with the contract requiring marketable title. The title search revealed that the house is subject to a mortgage held by a bank. The outstanding balance on the mortgage is significantly less than the contract price for the house. The seller has informed the buyer that the mortgage will be satisfied at closing using the funds paid by the buyer. The buyer, who is having second thoughts about the purchase, asserts that the title is currently unmarketable and that they are entitled to rescind the contract immediately.
- The buyer may rescind because the presence of any mortgage lien renders title unmarketable until a release is recorded.
- The buyer may rescind because the seller cannot deliver a title free of the lien until after the buyer has paid the purchase price.
- The buyer may not rescind but is entitled to demand that the seller pay off the mortgage using other funds before the closing date.
- The buyer may not rescind because a mortgage that the seller will pay off at closing from the sale proceeds does not render title unmarketable. (correct answer)
Explanation: When you encounter a question about marketable title and existing liens, focus on the timing of when title must be marketable - typically at closing, not before.
A mortgage lien doesn't automatically render title unmarketable if the seller can and will satisfy it at closing using sale proceeds. Courts recognize this common practice where sellers use buyer's funds to pay off existing mortgages, as long as the remaining proceeds are sufficient. Here, since the mortgage balance is significantly less than the contract price, the seller can satisfy the lien and still have funds to complete the transaction.
The buyer cannot rescind immediately because the title defect (if any) is curable at closing. The seller's obligation is to deliver marketable title at closing, not maintain it throughout the entire contract period.
Answer A is wrong because not every mortgage lien renders title unmarketable - only those that cannot or will not be satisfied at closing. Answer B incorrectly suggests there's a timing problem with using the buyer's funds to cure the defect. This circular reasoning misunderstands standard real estate practice. Answer C is incorrect because the buyer cannot unilaterally demand that the seller use alternative funding sources when the existing arrangement (paying off the mortgage at closing) is legally acceptable and practical.
Remember this key principle: marketable title is required at closing, not during the contract period. Sellers can cure most title defects, including mortgage liens, at closing using sale proceeds, provided sufficient funds remain to complete the transaction.
Question 12
A seller entered into a valid contract to sell a parcel of land to a buyer. The contract was silent as to the quality of title. A title search revealed that the property was subject to a recorded easement allowing a utility company to run underground power lines across a ten-foot strip at the far northern edge of the property. The power lines are not visible from the surface. The buyer was unaware of the easement when signing the contract and now seeks to rescind the agreement, arguing the title is unmarketable.
- The buyer can rescind because the existence of any undisclosed easement renders title unmarketable as a matter of law.
- The buyer can rescind because the undisclosed utility easement is an encumbrance that diminishes the value of the property. (correct answer)
- The buyer cannot rescind because utility easements are generally considered beneficial improvements that enhance marketability.
- The buyer cannot rescind because only easements that substantially interfere with the use and enjoyment render title unmarketable.
Explanation: Marketable title is title reasonably free from doubt and the threat of litigation. An undisclosed easement is an encumbrance that renders title unmarketable, regardless of whether it is beneficial or whether it substantially interferes with the property's use. The mere existence of a non-possessory interest held by a third party, like this easement, constitutes a cloud on title, allowing the buyer to rescind the contract before closing. Choice B is correct because the easement is an encumbrance. Choice A is too broad; some visible or known easements may not render title unmarketable. Choice C is incorrect; while some may view utility easements as beneficial, they are still encumbrances. Choice D states an incorrect legal standard; the degree of interference is not the test for whether an easement as an encumbrance makes title unmarketable.
Question 13
A seller owned a parcel of land that was landlocked. Twenty years ago, the seller established a valid easement by necessity over a neighbor's adjacent property to access a public road. The easement was never recorded, but it has been in continuous use. The seller has now contracted to sell the land to a buyer, with the contract requiring marketable title. The buyer's title search did not reveal the easement, but a physical inspection would have shown the access road. The buyer now claims the title is unmarketable because the property lacks recorded legal access.
- The title is unmarketable because an unrecorded easement is not sufficient to provide the legal access required for marketability. (correct answer)
- The title is unmarketable because easements by necessity are terminable if the necessity ceases, creating uncertainty.
- The title is marketable because a valid, existing easement by necessity provides the required legal access, even if unrecorded.
- The title is marketable because the buyer had inquiry notice of the access road from a physical inspection of the property.
Explanation: Marketable title requires that legal access to the property be established in the public records. While a valid easement by necessity exists, the fact that it is not recorded means the buyer would have to prove its existence through litigation if the neighbor ever blocked access. This potential for litigation renders the title unmarketable. The buyer is entitled to access that is documented in the record, not one that depends on proving facts in court. Choice A is correct. Choice B states a correct legal principle about easements by necessity but it is not the primary reason title is unmarketable; the lack of record notice is the key defect. Choice C is incorrect because the lack of a recorded instrument is the critical flaw. Choice D is incorrect because inquiry notice is irrelevant to the seller's contractual obligation to provide marketable title of record.
Question 14
Your client entered into a contract to purchase a vacant lot. The contract requires the seller to convey 'marketable title, free from all encumbrances.' Your title search reveals that the lot is subject to an irrevocable license, recorded and granted by a previous owner to a neighboring landowner, allowing the neighbor to use a portion of the lot for a garden. The license is, by its terms, binding on the grantor's 'heirs and assigns.' Your client does not want the garden on the property.
- The title is marketable because a license is a personal, non-possessory right that does not run with the land and is not an encumbrance.
- The title is marketable because a license is revocable at will by the new owner, so it does not create a lasting cloud on title.
- The title is unmarketable because the recorded instrument, despite being labeled a license, functions as an easement and is an encumbrance. (correct answer)
- The title is unmarketable only if the value of the property is substantially diminished by the presence of the neighbor's garden.
Explanation: While a license is typically a revocable, personal privilege, an irrevocable license that is intended to be binding on successors ('heirs and assigns') and is recorded functions much like an easement. Courts will often treat such an instrument as an easement, which is an encumbrance that runs with the land and renders title unmarketable if not disclosed and accepted by the buyer. The language making it binding on assigns and the fact it was recorded indicate an intent to create a permanent interest, not a revocable license. Therefore, it is an encumbrance that violates the contract. Choice C provides the best analysis. Choice A is incorrect because this instrument has features beyond a typical license. Choice B is incorrect because the instrument's terms make it irrevocable. Choice D is incorrect; the existence of the encumbrance, not the amount of economic harm, is the primary test for marketability.
Question 15
A seller and a buyer entered into a contract for the sale of a house. The contract required marketable title and set a closing date of June 1, with a 'time is of the essence' clause. On May 25, the buyer's title search revealed a valid judgment lien on the property for $20,000, filed against the seller two years prior. The seller has sufficient equity in the property to pay the lien from the sale proceeds. The buyer, having found another property they prefer, notified the seller on May 26 that they were terminating the contract because the lien made the title unmarketable.
- The buyer's termination was proper because the existence of the lien on May 26 rendered the title unmarketable.
- The buyer's termination was proper because the 'time is of the essence' clause requires title to be marketable at all times after the contract is signed.
- The buyer's termination was premature because a seller has the right to use the sale proceeds to clear title at the closing. (correct answer)
- The buyer's termination was premature because the lien was for less than the total purchase price of the property.
Explanation: The seller's obligation is to provide marketable title at the time of closing, not before. It is standard practice for sellers to use the proceeds of the sale to pay off existing mortgages and liens at the closing itself. As long as the purchase price is sufficient to cover the lien and the seller is prepared to do so, the title is not unmarketable. The buyer's anticipatory repudiation before the closing date was improper. Choice C is correct. Choice A is incorrect because the seller is not in breach until the closing date arrives and they fail to deliver marketable title. Choice B is incorrect; 'time is of the essence' relates to the performance on the closing date, not before. Choice D is incorrect because the amount of the lien relative to the price is not the determinative factor; the key is whether it can be satisfied from the proceeds at closing.
Question 16
A seller owned a parcel of land that was landlocked. Twenty years ago, the seller established a valid easement by necessity over a neighbor's adjacent property to access a public road. The easement was never recorded, but it has been in continuous use. The seller has now contracted to sell the land to a buyer, with the contract requiring marketable title. The buyer's title search did not reveal the easement, but a physical inspection would have shown the access road. The buyer now claims the title is unmarketable because the property lacks recorded legal access.
- The title is unmarketable because an unrecorded easement is not sufficient to provide the legal access required for marketability. (correct answer)
- The title is unmarketable because easements by necessity are terminable if the necessity ceases, creating uncertainty.
- The title is marketable because a valid, existing easement by necessity provides the required legal access, even if unrecorded.
- The title is marketable because the buyer had inquiry notice of the access road from a physical inspection of the property.
Explanation: Marketable title requires that legal access to the property be established in the public records. While a valid easement by necessity exists, the fact that it is not recorded means the buyer would have to prove its existence through litigation if the neighbor ever blocked access. This potential for litigation renders the title unmarketable. The buyer is entitled to access that is documented in the record, not one that depends on proving facts in court. Choice A is correct. Choice B states a correct legal principle about easements by necessity but it is not the primary reason title is unmarketable; the lack of record notice is the key defect. Choice C is incorrect because the lack of a recorded instrument is the critical flaw. Choice D is incorrect because inquiry notice is irrelevant to the seller's contractual obligation to provide marketable title of record.
Question 17
You are representing a client who is purchasing a commercial property located in a city. The purchase agreement requires the seller to convey marketable title. Your due diligence reveals that the property is zoned for commercial use, but the seller's current use as a light manufacturing facility violates a specific provision of the city's zoning ordinance that prohibits such facilities in that zone. The city has not yet taken any enforcement action. Your client wants to use the property for a retail store, which is a permitted use.
- The title is marketable because the property is zoned for commercial use, which matches the buyer's intended use.
- The title is marketable because the city has not filed any notice of violation or commenced enforcement proceedings.
- The title is unmarketable because an existing violation of a zoning ordinance renders title unmarketable. (correct answer)
- The title is unmarketable because zoning ordinances themselves are considered encumbrances on title.
Explanation: While zoning ordinances themselves are not encumbrances that render title unmarketable (buyers are expected to be aware of them), an existing violation of a zoning ordinance does render title unmarketable. This is because the violation exposes the buyer to the risk of forced removal of the offending structure, fines, or other litigation from the municipality. The fact that the city has not yet taken action is irrelevant; the violation exists and creates a cloud on title. The buyer's intended conforming use also does not cure the seller's breach of the duty to provide marketable title at closing. Choice C accurately identifies that the existing violation makes the title unmarketable. Choice A is wrong because the buyer's intended use does not cure the defect. Choice B is wrong because the lack of current enforcement does not eliminate the risk of future enforcement. Choice D states an incorrect rule of law; zoning ordinances are not encumbrances for marketability purposes.
Question 18
Your client entered into a contract to purchase a vacant lot. The contract requires the seller to convey 'marketable title, free from all encumbrances.' Your title search reveals that the lot is subject to an irrevocable license, recorded and granted by a previous owner to a neighboring landowner, allowing the neighbor to use a portion of the lot for a garden. The license is, by its terms, binding on the grantor's 'heirs and assigns.' Your client does not want the garden on the property.
- The title is marketable because a license is a personal, non-possessory right that does not run with the land and is not an encumbrance.
- The title is marketable because a license is revocable at will by the new owner, so it does not create a lasting cloud on title.
- The title is unmarketable because the recorded instrument, despite being labeled a license, functions as an easement and is an encumbrance. (correct answer)
- The title is unmarketable only if the value of the property is substantially diminished by the presence of the neighbor's garden.
Explanation: While a license is typically a revocable, personal privilege, an irrevocable license that is intended to be binding on successors ('heirs and assigns') and is recorded functions much like an easement. Courts will often treat such an instrument as an easement, which is an encumbrance that runs with the land and renders title unmarketable if not disclosed and accepted by the buyer. The language making it binding on assigns and the fact it was recorded indicate an intent to create a permanent interest, not a revocable license. Therefore, it is an encumbrance that violates the contract. Choice C provides the best analysis. Choice A is incorrect because this instrument has features beyond a typical license. Choice B is incorrect because the instrument's terms make it irrevocable. Choice D is incorrect; the existence of the encumbrance, not the amount of economic harm, is the primary test for marketability.
Question 19
A buyer contracted to purchase a large, wooded lot from a seller. The contract provides for conveyance of marketable title. Before closing, the buyer commissioned a survey which revealed that the seller's garage encroaches by five feet onto the neighboring property. The neighbor has not objected to the encroachment, which has existed for three years. The buyer seeks to terminate the contract based on this discovery.
- The buyer may terminate because an encroachment of the seller's property onto adjacent land renders title unmarketable. (correct answer)
- The buyer may not terminate because the encroachment is onto a neighbor's land, not from a neighbor onto the seller's land.
- The buyer may not terminate because the neighbor has not objected, implying consent or waiver of any claim.
- The buyer may not terminate because the encroachment is a physical condition of the property, not a defect in title.
Explanation: Title is unmarketable if it exposes the buyer to a significant risk of litigation. An encroachment of a structure from the seller's property onto a neighbor's land (an 'encroachment out') creates such a risk. The neighbor could sue the new owner for trespass or seek an injunction forcing the removal of the garage. Therefore, a significant encroachment renders the seller's title unmarketable. A five-foot encroachment by a permanent structure like a garage is significant. Choice A is the correct answer. Choice B is incorrect; both encroachments 'in' and 'out' can render title unmarketable. Choice C is incorrect because the neighbor's current silence does not eliminate their legal right to sue in the future. Choice D is incorrect because while it is a physical condition, it has title implications due to the potential for litigation and questions about the boundaries of the property being conveyed.
Question 20
A testator devised a parcel of real property 'to my son for life, then to my son's children who survive him.' At the time of the testator's death, the son was alive and had one daughter. The son and his daughter have now entered into a contract to sell the property in fee simple absolute to a buyer, who will pay a price reflecting the full value of the land. The contract requires marketable title. The buyer's attorney has advised the buyer not to close.
- The advice is correct because the son only has a life estate and cannot convey a fee simple.
- The advice is correct because the son could have more children, whose future interests cannot be conveyed. (correct answer)
- The advice is incorrect because the son and his daughter together hold all present and future interests in the property.
- The advice is incorrect because the doctrine of merger would give the son a fee simple absolute upon joining with his daughter.
Explanation: The son has a life estate, and his children have a contingent remainder. The remainder is contingent because the takers (the son's children) are not fully ascertained until the son's death; only those who survive him will take. Furthermore, the class of 'children' is still open, as the son may have more children. Because of the interests of these unascertained and unborn remaindermen, the living son and daughter cannot convey marketable title to a fee simple absolute. Their conveyance would be subject to the claims of any other children the son might have who survive him. Choice B correctly identifies this issue. Choice A is incomplete; while the son alone cannot convey a fee simple, the issue is whether he can do so jointly with his living daughter. Choice C is incorrect because they do not hold all interests; the unborn beneficiaries hold future interests. Choice D misapplies the doctrine of merger, which is irrelevant here.