Titles - Types

Learning Outcomes

After reading this article, you will be able to distinguish the main types of title recognized in real property law, explain the difference between legal and equitable title, identify how title is affected by recording acts, and determine what constitutes marketable title. You will be able to apply these concepts to MBE-style questions and avoid common pitfalls regarding title disputes.

MBE Syllabus

For the MBE, you are required to understand the various forms of title to real property and their legal consequences. This article focuses on:

• Differentiating legal and equitable title.
• Recognizing how title is transferred and protected under recording acts.
• Understanding what makes a title marketable or unmarketable.
• Identifying the effects of defects, encumbrances, and adverse claims on title.
• Applying these rules to questions involving conveyancing, priorities, and title disputes.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following best describes "legal title" to real property?
   1. The right to possession and use, but not the right to transfer.
   2. The enforceable right to ownership recognized by a court of equity.
   3. The formal ownership interest recognized by law and enforceable in all courts.
   4. The right to receive proceeds from the sale of the property.
2. Under a notice recording act, who prevails if O conveys Blackacre to A (who does not record), then to B (who pays value and records), and then to C (who pays value but does not record, knowing of A's deed)?
   1. A
   2. B
   3. C
   4. O
3. Which of the following is most likely to render a title unmarketable?
   1. The property is subject to a visible utility easement.
   2. The seller acquired title by adverse possession and the record owner is still alive.
   3. The property is subject to a zoning restriction.
   4. The seller holds a quitclaim deed.

Introduction

A clear understanding of the types of title in real property is essential for analyzing conveyancing and title disputes on the MBE. Title refers to the legal rights to ownership and possession of land. The law recognizes several forms of title, each with distinct legal effects. This article explains the main types of title, how they are acquired and protected, and what makes a title marketable or defective.

Types of Title

Legal Title

Legal title is the formal ownership interest in property recognized by law. The holder of legal title is the person whose name appears on the deed or other instrument of conveyance and who has the right to possession, use, and transfer of the property.

Key Term: Legal Title The ownership interest in real property recognized by law, entitling the holder to possession, use, and the right to transfer the property.

Equitable Title

Equitable title arises when a person has a right to obtain full legal title, usually under a contract or trust, but does not yet hold legal title. For example, a buyer under a valid land sale contract holds equitable title until closing.

Key Term: Equitable Title The right to obtain legal title to property, recognized and enforceable in equity, such as the interest held by a purchaser under a contract before closing.

Marketable Title

Marketable title is a title that is free from reasonable doubt or risk of litigation. A buyer is entitled to receive marketable title at closing. Title is unmarketable if it is subject to undisclosed encumbrances, adverse claims, or defects in the chain of title.

Key Term: Marketable Title Title that is reasonably free from doubt, defects, or risk of litigation, and which a prudent buyer would accept.

Record Title

Record title is the ownership of property as reflected in the public land records. A person with record title is presumed to be the owner, but actual ownership may differ if there are unrecorded interests or defects.

Key Term: Record Title Title to property as it appears in the public land records, regardless of actual ownership or possession.

Recording Acts and Title Protection

Recording acts are statutes that determine the priority of competing claims to title. They protect bona fide purchasers (BFPs) who acquire property for value without notice of prior unrecorded interests. The three main types of recording acts are:

Key Term: Recording Act A statute that governs the effect of recording documents affecting title to real property, establishing priority among competing claimants.

• Race statutes: The first to record wins, regardless of notice.
• Notice statutes: A subsequent BFP without notice of a prior unrecorded interest prevails.
• Race-notice statutes: A subsequent BFP who records first and has no notice prevails.

Defects and Encumbrances Affecting Title

A title may be rendered unmarketable by:

• Gaps or defects in the chain of title.
• Undisclosed liens, mortgages, or easements.
• Adverse possession claims not reflected in the record.
• Outstanding future interests or claims by heirs.
• Pending litigation (lis pendens) affecting the property.

Visible, beneficial easements (such as utility lines) or zoning restrictions generally do not make title unmarketable if known to the buyer.

Worked Example 1.1

Seller contracts to sell Blackacre to Buyer. Before closing, Buyer discovers that the property is subject to an old, unreleased mortgage from a prior owner, but Seller promises to pay it off at closing. Is Seller required to deliver marketable title?

Answer: Yes, as long as Seller pays off the mortgage and obtains a release at closing, title will be marketable. If the mortgage remains unsatisfied after closing, title is unmarketable and Buyer may rescind.

Worked Example 1.2

O conveys Blackacre to A, who does not record. O then conveys Blackacre to B, who pays value and records. Under a notice statute, who has title?

Answer: B prevails. Under a notice statute, a subsequent bona fide purchaser without notice of the prior unrecorded deed prevails, even if the first grantee failed to record.

Exam Warning

In MBE questions, do not assume that record title is always marketable. Adverse possession, outstanding interests, or unrecorded encumbrances may render title unmarketable even if the seller appears as owner in the public records.

Revision Tip

Always check for defects in the chain of title, outstanding interests, and compliance with recording acts when analyzing title disputes.

Key Point Checklist

This article has covered the following key knowledge points:

• Legal title is formal ownership recognized by law and enforceable in all courts.
• Equitable title is the right to obtain legal title, often held by a buyer before closing.
• Marketable title is free from reasonable doubt, defects, or risk of litigation.
• Record title is ownership as shown in public land records, but may not reflect actual ownership.
• Recording acts protect bona fide purchasers and determine priority among competing claims.
• Title is unmarketable if subject to undisclosed encumbrances, adverse claims, or defects.
• Visible, beneficial easements and zoning restrictions generally do not render title unmarketable.
• Always analyze both the record and possible off-record defects when assessing title.

Key Terms and Concepts

• Legal Title
• Equitable Title
• Marketable Title
• Record Title
• Recording Act