Marketable title defects: Which item would render title unmarketable?

• A. Title acquired by adverse possession that has not yet been quieted
• B. A minor encumbrance that has been released
• C. Future interests with consent to transfer
• D. Publicly known encumbrance that is disclosed

Answer: (A)

Marketable title means the owner’s rights can be used or transferred without a reasonable risk of future dispute. A cloud on title arises when there is an unresolved claim or encumbrance that could be asserted against the rightful owner. If someone has title by adverse possession but has not yet pursued a quiet-title action to formalize and perfect that claim, a potential challenger still exists and the record shows a possible defect. Until that adverse claim is quieted, the title is not marketable because a buyer could fear a successful challenge to ownership.

In contrast, removing a minor encumbrance eliminates a defect. A future interest that can be transferred with consent does not by itself create a current cloud on title if it’s valid and properly limited. A publicly known encumbrance that is disclosed simply puts the buyer on notice; disclosure keeps the title marketable because the buyer is aware of the encumbrance and accepts it.