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Haisfield v. Lape - 264 Va. 632, 570 S.E.2d 794 (2002)

Rule:

A marketable title is one which is free from liens or encumbrances; one which discloses no serious defects and is dependent for its validity upon no doubtful questions of law or fact; one which will not expose the purchaser to the hazard of litigation or embarrass him in the peaceable enjoyment of the land; one which a reasonably well-informed and prudent person, acting upon business principles and with full knowledge of the facts and their legal significance, would be willing to accept, with the assurance that he, in turn, could sell or mortgage the property at its fair value. However, not all liens and encumbrances render a title unmarketable.

Facts:

The parties' contract provided that the purchasers would be entitled to the return of their earnest money if the sellers could not deliver marketable title. A "view" easement existed on the property preventing the construction of a building visible from its main residence for 30 years. Because of the view easement, the purchasers refused to close the transaction.  The sellers then filed a motion for judgment claiming that the purchasers breached the Agreement, and claiming the earnest money deposit plus interest as liquidated damages for the breach. Subsequently, purchasers filed a grounds of defense and counterclaims, maintaining that the sellers failed to deliver marketable title. The trial court granted judgment in favor of the sellers, holding that the line-of-sight easement did not materially or adversely affect the use of the property. Purchasers appealed.

Issue:

Did the “view” easement render the title unmarketable, thereby justifying the purchasers’ decision to not proceed with the closing of the transaction?

Answer:

Yes.

Conclusion:

The Supreme Court of Virginia held that the easement in question was clearly an encumbrance on the property restricting its use in such a manner as to render title unmarketable. The existence of the easement was not an open, visible, physical encumbrance that might have been considered in the establishment of the purchase price. The amount of the encumbrance was not definite, such as a tax lien or judgment lien, so it could not readily be cured by the sellers. This encumbrance, which rendered title unmarketable, was not excepted from the contract provisions regarding the respective rights and duties of the parties when title was not marketable. Therefore, the purchasers did not breach the contract by refusing to close the transaction, and they were entitled to the return of their earnest money.

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