A defective title is ownership of property or assets that cannot be legally transferred due to claims by someone else.
While the seller has an obligation to present marketable title to real property, the buyer is also responsible for examining any title defects and giving notice of any defect to the seller. The seller must attempt good faith efforts to cure defects in the title under reasonable circumstances, but one is not required to put in extraordinary efforts. Determining what constitutes reasonable due diligence to cure defects requires a fact-specific inquiry, particularly looking into the nature of the defects and how to cure them.
Under the Uniform Land Transactions Act, the seller must provide to the buyer the necessary documentation of the seller’s title. When the seller delivers the documents within a reasonable time, the buyer must investigate the seller’s title and give written notice of any alleged defect so that the seller can cure the defect within a reasonable time.
Parties can include an escape clause in the agreement to the sale of real property stating that the agreement will be void if the seller cannot transfer marketable title and is unable to cure title defects. The escape clause may not be available when the seller cannot prove that one has made reasonable efforts to cure the defects.
See e.g.; Liberty National Enterprises v. Chicago Title Insurance Company 157 Cal.Rptr.3d 664 (2013).
[Last updated in October of 2022 by the Wex Definitions Team]