P05-Title Objections

                        

Objective Form:

05.1  Where the evidence of title, as set forth above, shows spe-
cial exceptions to title other than those standard exceptions
commonly and ordinarily found in commitments or title binders for
standard coverage fee owner policies, and where such special ex-
ceptions relate to restrictions, conditions, defects or other
matters which would substantially interfere with Buyer's use of
the premises as ___________________, then within _________________
days of delivery of such evidence of title, Buyer shall deliver
written notice thereof to Seller.  Such notice shall state,
specifically, those exceptions to which objection is being made.
All objections not specifically enumerated within such a timely
delivered notice shall be waived by Buyer.

05.2  Within _______ days of Buyer's delivery of notice of ob-
jections to Seller, Seller may cure such objections or have the
exception waived or removed by the title company issuing the 


commitment.  If, within such ________ day period, Seller fails to
cure and/or have waived such objections and exceptions, or within
that period, Seller delivers written notice to Buyer that it
will not so cure, then, within ________ days from delivery of such
notice from Seller or the end of the period within which Seller
may cure (whichever is applicable), Buyer shall have the option
to:
          (i)  terminate this agreement by delivering written
              notice thereof to Seller in which event all sums
              paid or deposited by Buyer shall be returned to it;
              or
        (ii)  purchase the premises subject to such objections
              and exceptions with no diminution in the purchase
              price.
       (iii)  agree to extend the closing date for _______ days
              to give Seller additional time to cure such objec-
              tions.
    If Buyer fails to deliver notice of termination within that
period, the objections shall be waived and the transaction shall
close.


Comment:
    In the objective form the Buyer, faced with special ex-
ceptions to title, may not object unless the exceptions would
substantially interfere with its use of the premises.  If so,
then the Buyer must specifically notify Seller of those ex-
ceptions and the Seller has a predetermined period to cure them
or have them deleted by the title company.  Seller is, however,
under no obligation to do so.  If Seller refuses to or cannot
cure, than the Buyer must either notify of cancellation or take
the property subject to the exceptions.  The purchase price would
not be affected.
    As a practical matter, the Buyer and Seller, faced with such
incurable exceptions, would likely change the purchase price to
reflect that; however, under this form such a reduction is not
mandatory.

Alternatives:
    The optimal position of Buyer is to have the right to object
to any exception to title without debate over whether the defect
would substantially interfere with its use of the property.


There, the wording:
         "...and where such special exceptions relate to...
         which would substantially interfere with Buyer's use
         of the premises as ____________________,"
would be deleted.
    A compromise provision might substitute a reasonableness test
for exceptions hindering use.
         "...and where such special exceptions relate to...
         which might reasonably interfere..."
    The concept of good faith might be applied:
         "...and where the Buyer, in good faith deems that the
exception may interfere..."
     Apart from the issue of what is objectionable, there is an
equally significant issue of whether the Seller must cure the ob-
jectionable item.  Where Seller may be forced to cure, the provi-
sion in Section 2 may be chYanged to allow Buyer, as last resort,
to pay off the encumbrances on title through a closing credit.
         "Seller shall, prior to closing, cure all objections
         which are contained in such notice of objections.  If
         Seller is unable or fails to so cure, then and in that


         event, Buyer may either (i) cancel this agreement at any
         time prior to closing, in which event all sums paid or 
         deposited by it shall be returned or (ii) close the sale
         and have credited toward the purchase price all sums of
         money necessary to cure the objections, including all
         fees and legal costs thereof.  In the latter instance,
         closing shall be delayed not more than _______ days in
         which to cure such objections.
    The Seller may not wish to reduce the purchase price by the
amount necessary to cure all types of objections.  Imagine, for
instance, the difficulty of ascertaining the amount necessary to
cure a prior owner's failure to waive a right of dower.  The
amount of the claim of dower and the cost of locating the owner's
heirs could cost much more than is merited by the risk of claim.
Thus, in many agreements the Buyer's right to obtain a credit is
limited to those defects which may be cured by payment of an
ascertainable and definite amount.  Here the prior language may
be changed as follows:
         "If Seller is unable or fails to so cure, then and in
         that event, Buyer may either (i)...or (ii)  close the


         sale and have credited toward the purchase price all
         sums of money necessary to cure all of these objections
         which may be cured by payment of a definite and ascer-
         tainable amount."
    A Seller may wish to have an upper limit on the amount which
may be credited toward curing title defects.  In such an instance
the following clause may be added to the preceding provision:
         "Where, however, the cost of curing such objections
         exceeds $____________ then the amount credited toward
         the purchase price shall not exceed that amount and if
         Buyer desires to close, then Buyer shall pay any addi-
         tional amount necessary to so cure."
    Where the Buyer is to receive such a credit it may require
the Seller to provide information and documentation regarding the
lien and its payment.
         "Seller shall furnish to Buyer (Escrowee) such infor-
         mation and documentation as Buyer (Escrowee) requires
         in order to cure the title objections through the pay-
         ment of liens and other encumbrances."



    Where the value of Buyer's intended improvements of the
property are greater than the title insurance obtainable, the
Buyer may be less willing to risk an adverse title claim than
would the insuror.  There, the Seller's ability to "cure" a title
objection through convincing the title insuror to waive title ex-
ceptions might not be acceptable.  In that case the objective
form could be changed by deleting the following phrase which re-
fers to that method of "cure."
         "...Seller may cure such objections or have the ex-
         ception waived by the title company issuing the
         commitment...