Marketable title: Overview, definition, and example
What is a marketable title?
Marketable title refers to a property title that is free from significant defects, claims, or encumbrances, and is legally acceptable for sale, transfer, or financing. In other words, it is a title to property that can be transferred to another party without causing legal disputes or uncertainty regarding ownership. A marketable title provides assurance to the buyer or lender that the seller has clear and undisputed ownership of the property.
For example, when someone sells a piece of land, the title must be marketable to ensure that the buyer can legally take ownership without facing future legal challenges from other parties claiming ownership or rights to the property.
Why is a marketable title important?
A marketable title is crucial because it ensures that the transaction is legally sound and that the buyer will not face future claims, liens, or disputes over ownership. It gives buyers confidence that they will be able to use, sell, or mortgage the property in the future without encountering legal problems. For sellers, having a marketable title ensures that the sale can proceed smoothly and without delays.
Without a marketable title, a property transaction can be delayed or even canceled, and the seller may be required to fix any issues before the sale can proceed. This can result in additional costs, legal issues, and complications for both parties.
Understanding marketable title through an example
Imagine a person wants to sell a house. Before the sale can proceed, the buyer's attorney checks the property's title to ensure there are no unresolved liens, claims, or legal issues, such as an unpaid mortgage or a disputed ownership. If everything is clear and there are no legal obstacles to the transfer of ownership, the title is considered marketable.
In another example, a piece of land is being sold, but it has a history of unresolved claims from an adjacent property owner over boundary lines. This could cause the title to be considered unmarketable until the issues are resolved or the claims are cleared, ensuring the buyer does not face future ownership disputes.
An example of a marketable title clause
Here’s how a marketable title clause might appear in a contract:
“The seller agrees to convey to the buyer a marketable title to the property, free from any defects, claims, or encumbrances, except as otherwise agreed in writing by the parties. The title shall be subject only to valid liens or easements that do not impair the property's value or use.”
Conclusion
Marketable title is essential in real estate transactions as it ensures the transfer of property is legally valid and free from significant disputes or issues. It provides security to buyers that they are obtaining a clear and undisputed ownership interest, allowing for future use, transfer, or financing of the property. For sellers, providing a marketable title is crucial for completing the sale without legal delays or complications.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.