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Good and Marketable Title in Real Property Contracts

Posted on: March 7, 2013

A seller has an implied obligation to convey a good and marketable title in an agreement for the sale of real property unless there is a provision stating otherwise. A good and marketable title is one that is free from encumbrances. An encumbrance is any right or interest in land held by someone other than the owner that may exist. Encumbrances decrease the value of the owner’s title. Marketable title is also reasonably certain not to be called into question in the future so as to subject the purchaser to the hazard of litigation as to questions of fact or law to sustain its validity.

Under a contract of sale of real property, a purchaser is entitled to a fee simple conveyance that is free and clear of encumbrances. When a seller is unable to deliver good and marketable title, the purchaser is generally not compelled to execute the contract; however, the purchaser may consent to certain encumbrances remaining after the closing of title. Additionally, showing that a purchaser was aware of the existence of encumbrances on the property or defects in title at the time of purchase may protect the seller. If an encumbrance is open and obvious and the seller has notice or knowledge prior to entering the contract, the encumbrance does not need to be removed by the seller.

Where a seller expressly or by implication agrees to convey a good and marketable title, the duty is only satisfied by the conveyance of a title unencumbered and free from reasonable doubt as to any question of law or fact necessary to sustain its validity. A good and marketable title can be sold to a reasonable purchaser or mortgaged to a person of reasonable prudence without subjecting it to such doubt or cloud as will affect its market value.