P04-Title

                        

Objective Form

04.1  Seller shall, at closing, deliver title to the premises to
Buyer through a duly executed and recordable general warranty
deed, conveying good and marketable title to the premises, sub-
ject to and from which is excepted the following:
    (a)  All legal and/or dedicated roads and highways;
    (b)  All zoning ordinances and other local, state and    
federal laws, rules and regulations (and all violations thereof)
limiting or regulating the use or enjoyment of the premises or
the character, size, use or location of any improvement upon the
premises, including subdivision regulations, building code re-
strictions, environmental rules and regulations and use of oc-
cupancy regulations.
    (c)  All general and special taxes and assessments not yet
due and payable or for which bills have not been tendered.
    (d)  All matters listed as exceptions, both standard and spe-
cial, on the commitment for title insurance or other evidence of
title enumerated in the previous Section III, which exception is


not objected to or is deemed approved or waived by Buyer under
Section V hereof.
    (e)  All of the following reservations by Seller
              (i)
             (ii)
            (iii)
04.2  Seller shall further deliver to Buyer, at closing, an af-
fidavit of title avering that no labor, materials or services
have been furnished to or for the benefit of the premises within 
__________ days prior to closing, other than those which (i) have
been listed in the affidavit of title and (ii) have been paid in
full by closing, as evidence by receipts attached as exhibits to
said affidavit of title.

Comment
    In most real estate transactions, the issue which receives
least attention by business people, but which is most central to
the sale, is the nature of the property interest transferred.
Title transfer can range from a quit-claim deed, transferring
whatever interest, if any, the Seller has, to a full warranty


deed guaranteeing that the state of title is defect free.  In be-
tween are limited, special warranty or limited general warranty
deeds which, basically, guarantee against defects in title oc-
curring during the period of the Seller's ownership.  Commonly
the parties deal in terms of "marketable title" or "good" title,
the legal definition of which has been the subject of much
litigation and is of truly little benefit to those who must work
with it as a business.
    As a matter of practical business, most large companies ob-
tain title insurance coverage for properties which they purchase.
Thus, the issue of what type of title is being conveyed becomes
secondary to "what exceptions are contained in the title policy."
It is, thus, that clauses dealing with title are integrally
related to the clauses on evidence of title and title insurance.
This is the basis oYf the objective form.
         Where the property being purchased is improved with
structures valued well in excess of the amount of title insurance
available or where the Buyer is contemplating such construction,
the risk of loss becomes partially uninsurable and, accordingly,
the Buyer may be desirous of more stringent proof of marketable


title than the commitment for title insurance.  Furthermore, for
properties with multi-million dollar values, the Buyer may not
wish to rely solely on a title insuror whose cash reserves for
coverage of claims is smaller than that which many Buyers believe.


Objective Form:
    The title provisions in the objective form are integrally re-
lated to the provisions dealing with "objections to title."  In
the section on objections the Buyer is compelled, in the face of
uncured objections to title, to either cancel the agreement or to
waive its objections.  Thus, after closing, the Buyer has a
general warranty deed which warrants only those matters which are
insured (not excepted from coverage) under the Buyer's title
insurance.  The Seller does not warrant against possible title
defects which are know at closing and are of record (i.e. those
shown as exceptions on the title binder. The Seller does, how-
ever, warrant against hidden title defects not of record which
are covered by the Buyer's standard fee owner's title insurance
policy. Thus, the Buyer is protected by insurance, the Buyer's


insurer has a claim against Seller for hidden defects and the
Seller is either protected by its own title insurance for "hid-
den" defects arising prior to closing or for hidden defects aris-
ing during its ownership.  (This may be done relatively
inexpensively in many instances.)
    The objective form also forces the Seller to warrant against
mechanics' or materialmen's lien on the premises and to provide
further proof that those with such claims have been fully paid.

Alternatives
    From the Buyer's perspective, the intent is to receive defect
free title to the property.  The Buyer is best satsfied by the
following provision:
         "Seller shall, at closing, deliver title to the Premises to
         Buyer by a duly executed and recordable general warranty
         deed, conveying good and marketable title to the premises."
    From the Seller's perspective, the intent is to transfer only
such interest in the premises which it actually has at closing,
subject to all of the title defects which then exist.  The Seller
is best satisfied as follows:


         "The Seller shall, at closing, deliver to Buyer such
         right title and interest to the premises which Seller
         then has, by a duly executed and recordable quit-claim
         deed."
    Obviously, most Buyers are unsatisfied with the almost total
exculpation of the Seller found in a quit claim deed.  Buyers
have been known, however, to accept what they think is a warranty
deed which, in fact, warrants no more than a quit-claim deed, by
the Seller's insertion of the following language in the contract
(or deed) dealing with those matters that the conveyence is
subject to:
         "All liens, encumbrances, claims or rights of title,
         conditions and any other matter or defect of title, 
         whether or not of record, which exists as of the date
         of closing."
    Note that the Buyer, in accepting such a quit-claim or
"secretive" quit-claim deed, may lose its insurance coverage as
the insurer has been denied its right of subrogation to the
Buyer's recourse against the Seller for hidden defects (not of
record).


    In certain states it is common practice to convey title by a limited
or special warranty deed which warrants only that there are not title
defects which arose during the period of Seller's ownership.
         "The Seller shall, at closing, convey title through a
limited (or special) warranty deed, subject to the following:"
     In between the ultimate Buyer's and Seller's positions are a
myriad of others, each oYne excepting a particular item or items
from the Seller's warranty of title.  The following clauses may,
thus, be found under the phrase of the objective form which reads
"subject to and from which is excepted the following."
      1.  Boundary problems and encroachments
             "All discrepancies, conflicts, shortages of area, boun-
             dary lines, encroachments, overlapping of improvements 
	     or any other state of facts which an accurate, physical 
	     inspection or survey of the premises might disclose."
      2.   Leases
             "All rights of parties in possession under any lease.
      3.   Adverse Possession
             "All rights of parties in possession, both actual 
   	     and constructive."


      4.   Standard Exceptions of Title Policies
             "All standard exceptions to title as are commonly
             and ordinarily found in the commitment for title
             insurance or other evidence set forth herein."
      5.   Public Utilities
              "All recorded or unrecorded assignments, easements,
              grants, leases, licenses, reservations, rights-of-
              way and the rights and privileges, by prescription
              or otherwise, for the construction, installation,
              maintenance, use, operation, repair, extension, re-
              newal and removal of public and private alleys,
              crossings, highways, overhead runways, roadways,
              sidewalks, streets, tunnels, railways,
              viaducts and water, sewage, storm sewers, drains,
              gas, electric, steam and any and all other service
              and utility lines, conduits, drains, gas, electric,
              steam and any and all other service and utility
              facilities which are for the benefit of the public
              or surrounding property owners or which are owned
              or operated by any public utility."


      6.  Party Walls
              "All party wall agreements whether or not of record
              and rights occurring thereunder."
      7.  Riparian Rights
              "Inland and Tidal Wetland laws and regulations of the
              state or locality in which the premises are located
              any riparian drainage or littoral rights of others,
              common law or statutory, in and to any water or body
              of water adjoining or passing through the premises."
      Often, the Buyer is only interested in having title be such
that it will be insured at standard rates by the title company.
              "Seller shall, at closing, deliver to Buyer good
              and marketable title to the premises subject only
              to such matters as will be insured at standard
              rates by the title insurance company."
         Where extended coverage is desired, the clause would be
adapted as follows:
              "Seller shall, at closing, deliver to Buyer good 
	      and marketable title to the premises subject only 
	      to such matters as the title insurer will insure 


	      at standard rates under an extended coverage fee 
	      owners title policy."
    Particularly concerning the personal property which may or may
not be deemed a part of the premises, a Buyer may desire the following
provision warranting against the claims of secured creditors or those
having equitable liens upon those assets of the Seller:
              "The affidavit of title delivered by Seller shall
              contain the following warranties by Seller:
                   (i)  There are no pending suits, proceedings,
                        judgments, bankruptcies, assignments for
                        the benefit of creditors, insolvency pro-
                        ceedings, liens or executions against or
                        affecting the Seller which does or might
                        affect the title to the premises.
                  (ii)  There are no existing security agreements,
           Y             financing statements or other contractual
                        liens upon the premises, other than those
                        listed in Exhibit _____________ hereto.