23.0 I. Overview

• Jurisdiction: New York

I. Overview

The determination of marketability is probably the most significant aspect of any consideration of a real estate title. The concepts of title and ownership were considered in previous chapters. Although ownership encompasses the bundle of property rights and title expresses or evidences the right to assert and enjoy those rights, it is only the ability to dispose of the property that can convert the ownership into money, services or other property. To effect such a disposition on favorable terms, the title must be marketable—that is, one of such quality that a willing purchaser will accept or that an unwilling purchaser could be compelled to accept.

The concept of marketability as applied to real estate titles is founded on equitable principles developed in the English Courts of Chancery.³⁶⁵⁹ As it developed in the United States, it became recognized both in law and equity in most states and in equity alone in some states.³⁶⁶⁰ In 1990, the Uniform Law Commissioners promulgated a Uniform Marketable Title Act. Some states have also adopted marketable title acts which eliminate many questions that appear in the older land records.³⁶⁶¹ New York is not yet one of those states, although legislation to implement a Marketable Record Title Act was considered in the 2001–2002 session of the state legislature.³⁶⁶² Under that legislation, an interest in or a claim or charge, legal or equitable, present or future, with certain exceptions, affecting a parcel of real property would be null and void unless a notice of intent to preserve the interest was recorded within forty years of the effective date of the “root of title. A root of title was defined generally in the legislation as a recorded instrument transferring the interest which is the basis for the marketable record title of the property.³⁶⁶³

It is settled law in New York that a purchaser is entitled to a marketable title, unless the parties provide otherwise in their contract.³⁶⁶⁴ This right to a marketable title exists even where the contract of sale is silent on the point³⁶⁶⁵ or where it merely requires a quitclaim deed.³⁶⁶⁶ Every contract for the sale of land contains an implied warranty of good title to the land on the part of the vendor, unless such warranty is expressly excluded by the terms of the contract.³⁶⁶⁷ As a general rule, a purchaser at a foreclosure sale is also entitled to a marketable title.³⁶⁶⁸

If title is unmarketable, the purchaser is entitled to the return of his down payment.³⁶⁶⁹

Marketability standards tend to be generalizations which must be applied to specific factual situations.³⁶⁷⁰ One such generality is the oft-quoted statement that a marketable title is one that is free from encumbrances and from any reasonable doubt of its validity in the grantor, and, as noted, one that a reasonably prudent person would be willing to accept and one that an unwilling purchaser could be compelled to accept.³⁶⁷¹

Milton R. Friedman, Esq., in his book, Contracts and Conveyances of Real...