Also known as: title defects · defect of title · defects of title · defective title
Written by attorneys · grounded in primary & secondary sources — see below
An encumbrance or irregularity in the chain of title that prevents the seller from conveying marketable title. Marketable title is free from reasonable doubt such that a reasonably prudent purchaser with full knowledge of the facts would accept it. Title defects include unreleased liens, breaks in the chain of title, outstanding interests such as easements or covenants, and litigation that clouds title. The buyer may rescind or refuse to perform if the seller cannot cure the defect by closing.
Tyrone Tran contracted to sell land to Tanya Tang. A title search revealed a recorded option held by a missing former tenant granting repurchase rights over part of the parcel. Tyrone could not locate the option holder or obtain a release within the contract's cure period. Tanya refused to close and sought return of her deposit because the outstanding option created reasonable doubt about clear ownership.
Tyler Taylor agreed to buy property from Thomas Thompson under a contract requiring marketable title. The title commitment listed an unused recorded easement as a standard exception, and the insurer offered to insure at ordinary rates. Tyler refused to close, asserting that the easement impaired planned development and created doubt a prudent buyer would not accept. The tender of insurable title did not satisfy the marketable-title obligation.
Select any source to read its text and confirm it supports the definition.
Unreleased liens, breaks in the chain of title, outstanding interests such as easements or covenants, and litigation that clouds title all constitute title defects. A recorded option held by an unlocatable party creates reasonable doubt that prevents a prudent purchaser from accepting the title.
Supporting sources
Yes. When the contract requires marketable title, the willingness of a title insurer to cover an easement or other defect at standard rates does not discharge the seller's obligation. Marketability focuses on whether a prudent purchaser would accept the title free from reasonable doubt, not merely on the availability of insurance.
Supporting sources
No, provided the seller tenders a release within the contract's cure period. Once the release is recorded, the filing no longer creates an outstanding lien-like encumbrance on the real property, and the buyer cannot rely on it as grounds for rescission.
Supporting sources
…himself $15,000. Obviously the billing situation in a typical litigated case is more complex than in this bedrock example of a defective title claim, but some of the same principles are surely applicable. If A has a claim for contract damages in the amount of $10,000 against B, and retains an attorney to prosecute the claim, it…