Chapter 1 : General Principles and the Title Examiner

• Library: Standards for Examination of Real Estate Titles in Arkansas (2021 Ed.)

CHAPTER 1: GENERAL PRINCIPLES AND THE TITLE EXAMINER

Standard 1.1 Marketable Title Defined

A marketable title is a title free from reasonable doubt both as to matters of law and fact, a title which a reasonable purchaser, well informed as to the facts and their legal bearings and willing and ready to perform the contract, would, in the exercise of that prudence which business persons ordinarily bring to bear upon such transactions, be willing to accept and ought to accept.³ A marketable title is "not only a title that [a purchaser] can hold against all adverse comers, but one that he can hold without reasonable apprehension of its being assailed, and one that he can readily transfer, if he desires, in the market."⁴ Marketable title should not be confused with the marketability of the property itself, or economic marketability.⁵

Contracts to purchase real estate sometimes refer to the grantor having "indefeasible" title or "insurable" title instead of "marketable" title. Indefeasible title is a lesser standard than marketable title, which means that the grantor's title is better than anyone else claiming it but not necessarily of the quality that a reasonable buyer would find acceptable in an ideal marketplace. Indefeasible, as opposed to marketable, is the standard of title utilized in Texas. Given the economic interaction between Texas and Arkansas, a fair number of contracts appear in Arkansas providing for this lower standard. Insurable title means that the quality of title is sufficient for a title company to be willing to insure it as against other fee simple claimants, though it could be subject to any number of excepted encumbrances.

Standard 1.2 Examining Attorney's Attitude

The purpose of title examination, objections and requirements is to secure for the examiner's client, usually a purchaser, a title which is marketable as shown by the record, subject to no encumbrances other than those expressly provided for by the client's contract with the seller. Objections and requirements should be made only when irregularities or defects in title can be reasonably expected to expose the purchaser or lender to the hazard of adverse claims or litigation.⁶

Standard 1.3 Reference to Title Standards

An attorney drafting a real estate sales contract should recommend that the contract provide that marketability of title be determined in accordance with these title standards and that the existence of encumbrances and defects, as well as the effect to be given to any that are found, be determined in accordance with such standards.⁷ In the alternative, an attorney drafting a contract for sale of real estate should recommend including language similar to the following in the contract: "It is mutually agreed and understood that no matter specifically covered by the Standards for the Examination of Real Estate Titles in Arkansas adopted by the Arkansas Bar Association shall be construed as an encumbrance or defect in title so long as the same is not so construed under such standards where applicable. It is also agreed that any defect in the title which comes within the scope of any of such title standards shall not constitute a valid objection on the part of the buyer provided the seller furnishes affidavits or other curative materials, if any, in recordable form, required in the applicable standard to cure such defect."⁸

Standard 1.4 Scope of Examination

Notwithstanding anything else contained in these standards, the client may limit the scope of the attorney's examination and, if such examination is so limited, such limits should be explicitly defined in the title opinion.

Standard 1.5 Definitions

Accretion: An addition to riparian land, gradually and imperceptibly made by water to which the land is contiguous.

Ad Valorem Taxes: Literally meaning "according to value" and used to designate an assessment of taxes against real property based upon a certain proportion or percentage of the property's value.

Affidavit: A written or printed declaration or statement of fact, made voluntarily, and confirmed by the oath or affirmation of the party making it, taken before a notary public or other person having authority to administer such oath or affirmation; the process requires concurrent action on the part of the affiant and the authorizing officer.⁹

Appurtenance: A subordinate or ancillary item or object belonging/attached to a principal item, object or tract which passes together with or incident to such principal item, object or tract, such as an easement.

Avulsion: An addition to riparian land made when a body of water...