If there is a defect in the legal title, can a transaction still proceed?

A basic provision of any real estate purchase and sale agreement requires that the seller deliver good record and marketable title to the property to be sold. If the property is registered land, the Registry District of the Land Court will decide what documents may be registered, and, if it is satisfied that all of the documents have been done properly, it will accept the documents and it will issue a Transfer Certificate of Title to the new buyer. If the property involves unregistered land, which is commonly the case, then the attorney for the buyer or the lender, whoever is responsible for doing the title, will make a judgment call as to whether or not the title is marketable. In virtually all instances these days title insurance comes into play so if the attorney has any questions about the marketability of title they will generally run it by the title insurance underwriter. If the underwriter believes that there is a marketability of title issue, they will either refuse to issue a title policy or they will issue a title policy but they will take exception for the marketability issue. If they are convinced that there is little likelihood of anybody claiming a paramount title, they may issue affirmative insurance against the enforcement by any other party as a result of the defect for which the exception is taken. For instance some titles are based upon a deed from a city or town based on a low value tax taking. A party may own the property for 20 or 30 years, which would give the owner are right to the property by adverse possession, so a claim party against whom the tax title was taken that the taking was defective is so slim that the title insurance company may very well agree to affirmatively insure over the defect.

If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.