A defective title is ownership of property or assets that cannot be legally transferred due to claims by someone else.
While the seller has an obligation to presentmarketable titletoreal property, the buyer is also responsible for examining any title defects and giving notice of any defect to the seller. The seller must attemptgood faithefforts to cure defects in the title under reasonable circ*mstances, but one is not required to put in extraordinary efforts. Determining what constitutes reasonable due diligence to cure defects requires a fact-specific inquiry, particularly looking into the nature of the defects and how to cure them.
Under the Uniform Land Transactions Act, the seller must provide to the buyer the necessary documentation of the seller’s title. When the seller delivers the documents within a reasonable time, the buyer must investigate the seller’s title and give written notice of any alleged defect so that the seller can cure the defect within a reasonable time.
Parties can include anescape clausein the agreement to the sale of real property stating that the agreement will be void if the seller cannot transfermarketable titleand is unable to cure title defects. Theescape clausemay not be available when the seller cannot prove that one has made reasonable efforts to cure the defects.
See e.g.; Liberty National Enterprises v. Chicago Title Insurance Company 157 Cal.Rptr.3d 664 (2013).
[Last updated in October of 2022 by the Wex Definitions Team]
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The article delves into the notion of a defective title, a critical aspect in real estate transactions. A defective title refers to ownership of property or assets that cannot be legally transferred due to claims by someone else. This could arise from various issues such as liens, encumbrances, or other legal impediments.
The concept of marketable title is introduced, highlighting the seller's obligation to present real property with a title free from defects that could impede its transfer. This is a fundamental aspect of real estate transactions, ensuring that the buyer receives clear and unencumbered ownership.
Examining title defects is a shared responsibility, with the buyer obligated to scrutinize the title and notify the seller of any defects. The buyer's due diligence is crucial in this process, requiring a comprehensive assessment of the title's nature and any possible defects.
The article emphasizes the seller's duty to make good-faith efforts to cure defects in the title under reasonable circ*mstances. However, it clarifies that extraordinary efforts are not obligatory, emphasizing the importance of reasonableness in addressing title defects.
The Uniform Land Transactions Act is mentioned, specifying that the seller must provide necessary documentation of their title to the buyer. This legal framework establishes the timeline for the seller to deliver documents, and in turn, mandates the buyer to investigate the title promptly and report any defects for potential cure.
The notion of reasonable time surfaces repeatedly, indicating that both parties are bound by a reasonable timeframe to fulfill their respective obligations in the title transfer process. What constitutes reasonable due diligence and efforts to cure defects is contingent on the specifics of each case, demanding a fact-specific inquiry.
The article introduces the concept of an escape clause, allowing parties to include a provision in the agreement that renders it void if the seller cannot transfer marketable title and is unable to cure title defects. However, it notes a limitation: the escape clause may not apply if the seller cannot demonstrate reasonable efforts to address the defects.
A legal precedent, Liberty National Enterprises v. Chicago Title Insurance Company, is cited, adding weight to the discussion. This case serves as an illustrative reference, underlining the significance of reasonable efforts in curing title defects.
In conclusion, the article provides a comprehensive overview of the legal intricacies surrounding defective titles, marketable titles, due diligence, and the contractual mechanisms, such as escape clauses, that come into play in real estate transactions.
