Every time someone in Massachusetts sells real estate, the paperwork usually specifies that they will provide good, clear, and marketable title to the buyer. It may sound like a bunch of meaningless legal jargon, but the words are in fact very important. Clear and marketable title signifies two important aspects of the ownership of the property. It means that the property is not encumbered by a problem such as a lien and it means that ownership is valid and cannot be challenged by someone else claiming ownership.
Specifically, with a clear and marketable title, the person selling the property is telling you that they can prove the unbroken chain of title (ownership) leading up to the sale. To assert this, someone must go to the Registry of Deeds and trace the records of ownership of the property. If there is a gap in the records somewhere along the way or any type of problem, then the seller does not have a clear title to convey.
To be more specific, when the evidence of chain of title is provided entirely by the records in the Registry of Deeds, that is referred to as “record title.” The seller can use other evidence to prove an unbroken chain of title, and can still convey good title, but it won’t be record title. For instance, in the gap in the registry records, a seller long ago may have provided the deed to the buyer but the transfer was never recorded. Ownership is still good, but more difficult to prove.
The other aspect of clear and marketable title refers to certain encumbrances. It means that no one holds a mortgage on the property or has a lien on the property and that there are no pending lawsuits regarding ownership that would “cloud” the title to the property. Technically, in most cases, the property is still subject to the seller’s mortgage, but the agreement specifies that this obligation will be satisfied by the proceeds from the sale, so the seller is still able to provide what is treated as clear title.
Another modern practical feature of real estate sales that affects clear and marketable title is title insurance. If there are defects in the chain of title, such as an old mortgage that was discharged but not recorded, title insurance can take care of the problem and allow a sale to go through. In this type of case, the title is not considered clear and marketable, but it is insurable title.
When there is a problem with the title and no title insurance, it can be costly and time-consuming to fix. If you are buying property and in a situation where the seller can provide insurable title but not marketable title, you should discuss the situation with an experienced real estate attorney. When it comes time to sell that property, you may find yourself in a difficult situation.
If you have questions or need assistance with any real estate or estate planning issues, we would be happy to assist. Just reach out.