PastPaperHero | Titles

Learning Outcomes

This article explains the main types of title recognized in real property law and their exam‑relevant consequences, including:

Distinguishing legal, equitable, record, and marketable title, and identifying which party holds each interest in common fact patterns.
Describing how equitable conversion reallocates title and risk of loss between seller and buyer under land sale contracts.
Applying recording act rules to competing conveyances and determining who has superior title under race, notice, and race‑notice statutes.
Evaluating whether a seller’s title is marketable in light of liens, easements, encroachments, adverse possession, and pending litigation.
Comparing quitclaim and warranty deeds, and linking deed covenants to title quality, remedies, and the merger doctrine at closing.
Spotting defects in the chain of title, including void, voidable, and wild deeds, and predicting their effect on later purchasers.
Avoiding classic MBE traps involving record title versus marketable title, BFP status, inquiry notice, and assumptions about encumbrances on the bar exam.

MBE Syllabus

For the MBE, you are required to understand forms of title to real property and their consequences for conveyancing and priority, with a focus on the following syllabus points:

Distinguishing legal and equitable title in contracts, trusts, and mortgages.
Applying equitable conversion and understanding who bears the risk of loss before closing.
Identifying how recording acts protect bona fide purchasers and allocate priority among competing claimants.
Determining when title is marketable or unmarketable and the buyer’s remedies.
Recognizing defects in the chain of title (void and voidable deeds, wild deeds) and their effect on later purchasers.
Understanding how encumbrances (mortgages, easements, covenants, liens) and adverse claims affect title.

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.

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.
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
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

Title in property law refers to the legal rights associated with ownership of land. Different situations divide those rights between different people, or expose them to competing claims. On the MBE, you must track:

Who has legal title (formal ownership recognized at law).
Who has equitable title (ownership recognized in equity, often under a contract or trust).
Who appears to own the property according to the public records (record title).
Whether the seller’s title is marketable—good enough that a reasonable buyer would accept it.

These distinctions drive many exam questions about conveyancing, recording acts, and defects in title.

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, and enforceable in courts of law and equity.

Key Term: Equitable Title
The ownership interest recognized in equity that gives the holder the right to obtain legal title, such as the interest of a purchaser under a valid land sale contract before closing.

Key Term: Record Title
Title to property as it appears in the public land records, regardless of who actually has possession or equitable rights.

Key Term: Marketable Title
Title that is reasonably free from doubt and unlikely to subject the buyer to litigation, such that a prudent buyer would accept it.

Key Term: Recording Act
A statute that governs the effect of recording documents affecting title to real property and establishes priority among competing claimants, usually protecting bona fide purchasers.

Key Term: Bona Fide Purchaser (BFP)
A person who acquires an interest in property for value and without notice of a prior conflicting interest, and who is protected by recording acts.

Types of Title

Legal Title

Legal title is the formal ownership interest in property recognized by law. The holder of legal title is typically the person named on the deed who has the present right to possess, use, enjoy, encumber, and transfer the property.

Key features of legal title:

It is what the deed conveys at closing.
It allows the owner to bring traditional legal actions (e.g., ejectment) to recover possession.
It is usually what the recording system tracks; the person shown in the records has record legal title.

Common MBE contexts where legal title matters:

Land sale contracts: Before closing, legal title usually remains with the seller; the buyer has equitable title.
Installment land contracts: The vendor often retains legal title as security; the purchaser has equitable title while making payments.
Mortgages: In “title theory” states (minority), the lender holds legal title for security; in “lien theory” states (majority), the borrower retains legal title and the lender only has a lien.

Key Term: Warranty Deed
A deed (often general warranty) by which the grantor conveys legal title and makes covenants about the quality of that title, including promises against defects and encumbrances.

Key Term: Quitclaim Deed
A deed that conveys whatever interest, if any, the grantor has, without any covenants or warranties regarding the quality of title.

MBE trap: A quitclaim deed does not automatically mean that title is bad or unmarketable. It only means the grantor is not promising anything about title; the actual title can still be perfectly good.

Equitable Title

Equitable title arises when someone is entitled in equity to obtain legal title, even though legal title is still in another person’s name.

The most heavily tested example is the land sale contract.

When a buyer and seller sign a specifically enforceable land sale contract:

Equity treats the buyer as the equitable owner of the property.
The seller holds bare legal title as security for the unpaid purchase price.

This is the doctrine of equitable conversion.

Key Term: Equitable Conversion
The doctrine under which, upon signing an enforceable land sale contract, the buyer is treated as the equitable owner of the land and the seller is treated as holding legal title in trust for the buyer, subject to the buyer’s obligation to pay.

Consequences of equitable conversion on the MBE:

Risk of loss (majority rule): If the property is destroyed without fault before closing, the risk is on the buyer (as equitable owner), unless the jurisdiction has adopted a statute that keeps the risk on the seller.
The buyer’s equitable title is an equitable interest, which can be sold or devised.
The buyer is entitled to specific performance to obtain legal title at closing.

Equitable vs legal title in priority disputes:

Recording acts typically protect subsequent BFPs of legal title. A later BFP who takes a deed and records may defeat an earlier equitable title holder if the statute and notice requirements are satisfied.
A prior equitable interest holder (e.g., contract buyer who hasn’t recorded) can be cut off by a later BFP of legal title in many jurisdictions.

Worked hypotheticals often exploit this detail, so read carefully whether the interest is legal or purely equitable.

Marketable Title

Marketable (or “merchantable”) title is the quality of title the seller is implicitly obligated to deliver at closing under a land sale contract, unless the contract clearly provides otherwise.

Marketable title does not require perfect title, but it must be reasonably free from:

Defects that create a substantial risk of litigation, or
Defects that mean the seller does not own what they purport to convey.

Common sources of unmarketable title on the MBE:

Gaps or breaks in the chain of title (missing deeds, ambiguous descriptions).
Undisclosed liens and mortgages that will not be satisfied at closing.
Undisclosed easements or restrictive covenants, especially if they significantly limit use.
Encroachments (e.g., seller’s building encroaches on a neighbor’s land or vice versa) that could lead to a boundary dispute.
Outstanding future interests, such as a remainder or reversion in a third party, not being conveyed or released.
Adverse possession where title has not been quieted and the record owner could still contest the adverse possessor’s claim.
Pending litigation affecting title (a properly recorded lis pendens).
Violations of zoning ordinances or restrictive covenants, even if the restrictions themselves would not render title unmarketable.

By contrast, title is usually still marketable where:

The property is subject to visible, known, or recorded easements that the buyer knew or should have known about, such as obvious utility lines or a well‑documented driveway easement.
The property is merely subject to zoning restrictions (e.g., residential‑only zoning) that are being complied with.
The seller conveys by quitclaim deed rather than warranty deed; the deed form alone does not make title unmarketable.

Timing is critical:

The seller must provide marketable title at closing, not when the contract is signed.
Defects discovered before closing can be cured; a mortgage, for example, is fine if it will be paid off and released at closing.

Key Term: Encumbrance
A non‑possessory interest in land held by someone other than the owner of legal title, such as a mortgage, lien, easement, or restrictive covenant, that burdens the property.

Key Term: Defective Title
Title that is flawed in a way that casts reasonable doubt on ownership or exposes the buyer to a substantial risk of litigation, and therefore is not marketable.

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. A current but fully satisfied mortgage at closing does not prevent Seller from delivering marketable title.

Record Title and the Chain of Title

Record title is what appears in the public land records. It creates a strong presumption of ownership, but it is not conclusive.

Key Term: Chain of Title
The sequence of recorded documents (deeds, mortgages, etc.) through which title to real property has passed, from the sovereign or original owner down to the present owner.

Record title can differ from actual ownership because of:

Unrecorded interests (e.g., a buyer under a contract who never recorded a memorandum).
Defective deeds (void or voidable deeds in the chain).
“Wild” deeds that are recorded but not connected to the chain of title.
Adverse possession that has satisfied the statutory period but was never litigated.

Key Term: Wild Deed
A recorded deed that is not connected to the chain of title, typically because a prior deed in the chain was never recorded, so later searchers are not charged with notice of it.

MBE warning: Record title is not the same as marketable title. A seller may appear in the records, yet title is unmarketable because:

Someone else is in open adverse possession.
There is a substantial encroachment visible on the ground.
There is pending litigation or an undisclosed prior deed.

Recording Acts and Title Protection

Recording acts allocate priority among competing claimants when an owner conveys the same property interest more than once, or when different claimants assert inconsistent interests.

Most states use one of three basic systems:

Race statutes: The first to record wins, regardless of notice.
Notice statutes: A subsequent BFP without notice of a prior unrecorded interest prevails, even if the earlier grantee records later.
Race‑notice statutes: A subsequent BFP who takes without notice and records first prevails.

Because race statutes are rarely tested, most questions involve notice or race‑notice statutes.

Key Term: Shelter Rule
A doctrine that allows anyone who takes from a BFP (by sale, gift, or devise) to assert the same recording act protection as that BFP, even if the transferee has actual notice of prior unrecorded interests.

How recording acts interact with title types:

Initial conveyance: Legal title passes from grantor to first grantee when a valid deed is delivered, whether or not the deed is recorded.
Subsequent conveyance: If the grantor later purports to convey the same property to another person, the recording act determines which grantee’s title is superior.
Equitable interests: The acts usually protect BFPs who acquire legal title; prior equitable interests can be cut off if the later taker qualifies as a BFP and meets the statute’s requirements.

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. B took for value, had no notice of A, and therefore holds superior title.

Notice and Race‑Notice Statutes in Detail

Under both notice and race‑notice systems, the subsequent claimant must be a BFP:

Took for value (not as a donee, heir, or devisee).
Lacked actual, record, or inquiry notice of the prior interest at the time of conveyance.

Types of notice:

Actual notice: The purchaser actually knows of the prior interest.
Record (constructive) notice: The prior interest is properly recorded in the chain of title.
Inquiry notice: Visible facts (e.g., someone else in possession; a visible path suggesting an easement) would prompt a reasonable buyer to investigate, and that investigation would reveal the prior interest.

A race‑notice statute adds an additional requirement: the BFP must also record first.

Worked Example 1.3

O conveys Blackacre to A, who does not record. A then conveys to B, who pays value and promptly records. After that, O conveys Blackacre to C, a BFP who has no knowledge of the earlier deeds and who records after O‑to‑C. The jurisdiction has a notice statute. Who prevails?

Answer:
B prevails. A’s deed from O was unrecorded, but A could still convey A’s legal title to B. B is a BFP from A and recorded. C is a later BFP from O, but in a notice jurisdiction the focus is on notice of prior unrecorded interests at the time of the conveyance. When C took from O, C had no notice of O‑to‑A or A‑to‑B. However, O had nothing left to convey, because A already had legal title and had conveyed it to B. The recording act does not allow O to convey what O no longer owns.

This example reminds you to track who actually has legal title at each stage; the recording act does not magically create title.

Defects and Encumbrances Affecting Title

A title may be rendered unmarketable by:

Gaps or defects in the chain of title.
Undisclosed liens, mortgages, or tax assessments.
Unrecorded or undisclosed easements or restrictive covenants, especially those that substantially limit use.
Encroachments that suggest boundary disputes or potential litigation.
Adverse possession claims not reflected in the record.
Outstanding future interests (e.g., remainder interests not being conveyed).
Pending litigation (a properly recorded lis pendens).

Key Term: Void Deed
A deed that is legally ineffective from the outset (e.g., forged, executed by a nonexistent grantee, or by someone without capacity), which cannot pass title even to a later BFP.

Key Term: Voidable Deed
A deed that is valid unless and until set aside (e.g., due to fraud, duress, or lack of capacity), and which can pass good title to a later BFP if not avoided before that transfer.

Important marketability rules:

A deed in the chain that is void (e.g., forged) means no one down the line gets good title, even BFPs; that makes title unmarketable.
A deed that is merely voidable may still support marketable title if a later BFP took without notice before the deed was avoided.
Title obtained by adverse possession is generally considered unmarketable if the record owner could still appear and litigate, unless there has been a quiet title action or a long‑standing, undisputed possession.

Contrast zoning restrictions versus zoning violations:

Mere existence of zoning restrictions (e.g., “residential use only”) usually does not make title unmarketable.
Existing violations of zoning or covenants (e.g., structure exceeds height limits) do create a significant risk of enforcement and can render title unmarketable.

Worked Example 1.4

Seller contracts to sell Blackacre to Buyer. Seller’s title to part of Blackacre rests on adverse possession against Neighbor; there has never been a quiet title action, and Neighbor is still alive and lives nearby. Buyer discovers this before closing and objects. Must Buyer accept Seller’s title?

Answer:
No. Title based on unadjudicated adverse possession, especially where the record owner is still around and could sue, is generally considered unmarketable because of the substantial risk of litigation. Buyer may refuse to close and can seek rescission or specific performance with a price reduction only if Buyer voluntarily chooses to proceed.

Marketable Title vs. Deed Covenants and Merger

Two distinct concepts often appear together:

Implied covenant of marketable title in the land sale contract (pre‑closing protection).
Deed covenants (e.g., seisin, right to convey, against encumbrances, warranty) in a warranty deed (post‑closing protection).

At closing, under the merger doctrine, the contract’s provisions regarding title typically merge into the deed. After closing:

Claims about title quality are usually governed by the deed covenants, not the implied marketable title covenant.
If the buyer accepted a deed, the buyer generally cannot sue on the contract’s marketable title covenant; instead, the buyer must rely on appropriate deed covenants and their statutes of limitations.

If the deed is a quitclaim deed, there are no covenants, and the buyer usually has no post‑closing remedy for pre‑existing title defects—another reason buyers typically insist on a warranty deed.

Worked Example 1.5

Buyer contracts to purchase Blackacre from Seller. The contract is silent about the type of deed. Before closing, Buyer learns of a recorded restrictive covenant limiting the property to single‑family residential use. Buyer intends to build a single‑family residence and is unbothered by the covenant. The covenant is not violated. Buyer seeks to rescind on the ground that title is unmarketable. Is Buyer entitled to rescind?

Answer:
Probably not. A recorded, non‑violated use restriction that is consistent with the buyer’s contemplated use and is common in the area generally does not render title unmarketable. The covenant is disclosed in the record, and Buyer is taking the property subject to it. If the covenant were being violated, or severely restricted ordinary residential use, the result might differ.

Exam Warning

In MBE questions, do not assume that record title is always marketable. Adverse possession, outstanding unrecorded interests, encroachments, or pending litigation may render title unmarketable even if the seller appears as owner in the public records. Similarly, do not assume that a quitclaim deed means title is unmarketable; examine the actual defects.

Revision Tip

When analyzing a title dispute on the MBE, always ask:

Who holds legal title?

Who holds equitable title (if any)?

Who appears in the public records (record title)?

Is there a recording act issue involving a BFP?

At the relevant time (usually closing), is title marketable, or is there a substantial risk of litigation?

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 under equitable conversion.
Record title is ownership as shown in public land records but may not reflect actual ownership or equitable interests.
Marketable title is reasonably free from doubt, defects, or risk of litigation, and must be delivered at closing unless the contract provides otherwise.
Recording acts (race, notice, race‑notice) protect bona fide purchasers and determine priority among competing claims.
Notice can be actual, record, or inquiry; race‑notice statutes additionally require the BFP to record first.
Void deeds cannot pass good title, even to BFPs; voidable deeds can support good title in the hands of a later BFP.
Title is unmarketable if subject to undisclosed encumbrances, serious encroachments, outstanding future interests, unadjudicated adverse claims, or pending litigation.
Visible, known easements and ordinary zoning restrictions generally do not render title unmarketable if consistent with the buyer’s contemplated use.
After closing, contract covenants about marketable title usually merge into the deed; the buyer’s remedies depend on deed covenants (if any).

Key Terms and Concepts

Legal Title
Equitable Title
Marketable Title
Record Title
Recording Act
Bona Fide Purchaser (BFP)
Equitable Conversion
Encumbrance
Defective Title
Chain of Title
Wild Deed
Shelter Rule
Warranty Deed
Quitclaim Deed
Void Deed
Voidable Deed

Titles - Types