Marketable Title
The default rule is that the buyer has an implied right to marketable title. That is, the title of the land is marketable, free of defects at the time of closing. Consequently, if there is a defect, the seller is responsible for the damages caused by the defect. Marketable title is also an implied condition, that is, a breach of marketable title means the buyer can get out of the contract without breach.
However, the parties can agree to terms that alter what kind of defects may be acceptable. When the parties agree to these terms, it is called a contract title. For instance, if the buyer is satisfied with insurance covering the defects, then the seller’s obligations may also be satisfied (insurable title). Record title is where the parties gather proof of ownership by looking at deeds and others recorded (another form of contract title).
Encumbrances and Encroachments
An encumbrance is a nonpossessory interest in the property owned by a third party. For instance, if a mortgage is on the property, the lender does not have a possessory interest, but they do have a nonpossessory interest. Other examples of encumbrances include: easements, covenants, equitable servitudes, marital property rights, tax liens, etc. The basic rule is that an encumbrance on the property makes it unmarketable.
An encroachment is when an improvement of the property extends beyond what is permissible for the property to do, typically in the form of a trespass on another’s rights. For instance, if there is an easement or a setback on the property and an improvement extends over the easement or setback boundary, the improvement is encroaching on another’s rights. The general rule is that an encroachment renders the title unmarketable.
Staley v. Stephens
404 N.E.2d 633 (Ind. Ct. App. 1980).
Question
Whether a minor infringement on the setback zoning requirements renders title unmarketable.
Rule
Any infringement on the setback zoning requirements renders title unmarketable.
Holding
There was an infringement, and no waivers were obtained, affirmed.
Facts and Analysis
The Staleys were selling to the Stevens. Together, the parties agreed to the purchase of the Staleys’ home. The home sat upon a lot that contained a restrictive covenant that the home must contain a 10 foot setback from the property. Additionally, a zoning provision required all homes in the area to have a 8.5 foot setback. Here, the property was only 8.4 setback from the property line. So, regardless of the controlling provision, the home was encroaching on the setback. Upon learning of the encroachment through a survey, the Stevens failed to purchase the home because the Staleys would not obtain a waiver of the setback provision by the other landowners in the area.
This was a clear violation of the restrictive covenant and the zoning provision. However minor, the home was encroaching on the rights of others rendering title unmarketable.
Deeds
For a deed to be effective, it needs to include the names of the grantor and grantee, contains words of grant (what kind of conveyance), describe the land to be affected, and is signed by the grantor. Additionally, there must be an intent to deliver, delivery, and acceptance of the deed to be effective.
Warranty Deeds and Quitclaim Deeds
A general warranty deed is a deed where the seller is liable for any express warranties made during the entirety of the chain of title. That is, the grantor is taking on all the risk for the entire lifetime of the property. A special warranty deed is where the seller is liable for any express warranties made during the seller’s ownership of the property. A quitclaim deed is where there are no covenants in the deed, the buyer is taking the deed “as is” and bears the risk of any defects.
Egli v. Troy
602 N.W.2d 329 (Iowa 1999).
Question
Whether a third party defendant was responsible for a claim of acquiescence.
Rule
If the third-party defendant issues a special warranty deed and that individual may be responsible for damages to a defendant (third-party plaintiff), then summary judgment ought not to be granted.
Holding
Summary judgment should not have been granted, reversed.
Facts and Analysis
Engli discovered Troy building on their property, so they sued. Turns out Troy and Ransom had purchased the property from Greve by special warranty deed. Engli is arguing that they had erected a fence and that Greve had acquiescenced to the new boundary. If true, then Greve would have created the issue during her ownership, creating liability for herself of any litigation between Engli and Troy and Ransom.
Types of Covenants
Present Covenants
A covenant about the deed as it stands at the time of conveyance. That is, if the deed is conveyed and the covenant was false at that time, the breach occurred at the time of delivery. Additionally, these covenants do not run with the land. These include:
Seisin, the grantor covenants that he is conveying land that he properly owned.
Right to convey, the grantor promises that he had the legal right to convey the property.
Covenant against encumbrances, the grantor promises that there are no encumbrances on the land.
Future Covenants
These are covenants that protect the grantee from something that could happen in the future. Further, these covenants do run with the land (future successors also have the same rights by a general warranty deed). These include:
Covenant of quiet enjoyment, the grantor promises that the grantee may possess and quietly enjoy the land. A breach occurs if the grantee is evicted by someone who has a better title.
Covenant of warranty, the grantor warrants the title of the property, and the covenant is breached if the grantee loses possession of the land.
Covenant of further assurances, the grantor promises to give “further assurances” to ensure the grantee retains what they rightfully received. A breach occurs if the grantor fails to give further assurances. Breaches of all other covenants are for damages, but breach of this covenant is for specific performance.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
