Demystifying the Ohio Marketable Title Act of 1961

Introduction

The Ohio Marketable Title Act of 1961 (“MTA”) is a piece of legislation that mystifies real estate professionals whether they are new to the industry or have been closing real estate transactions for decades. But if we break down the MTA into digestible pieces, are we left with something remotely palatable? Let’s give it a try.

Defining Marketable Title

The definition of “marketable title” per Ohio Revised Code (“RC”) Section 5301.47 et seq. is simply title to real estate free from contention and/or doubt to the extent that a reasonable buyer would accept it, or, put another way, title to real estate that has no defects that could carry over as a problem for the new owner at whatever time the new owner decides to sell. Examples of things that could make a title to real estate “unmarketable” are encumbrances such as mortgages, adverse possession claims and violations of zoning laws.

Marketable Title in Practice

Professionals in the real estate industry, whether they are the real estate attorneys drafting purchase agreements or the escrow officer at the title agency reading said purchase agreements, deal with marketable title every day. Most real estate purchase agreements state that the seller must convey to the buyer marketable title. A seller that fails to convey marketable title under a contract that, expressly or impliedly, calls for marketable title is in breach of the contract. Since title insurance is what helps prove title is marketable, title insurance is a very valuable aspect of most real estate purchase transactions. Note that “marketable title” is not that same as “insurable title.” When a title is marketable, it means that the ownership chain is free from defects and as such it can be placed for sale without additional efforts whereas insurable title means that a title insurance company has agreed in advance to provide insurance against defects that may affect the ownership or value of a property.

There is no difference between marketable title in a commercial transaction and marketable title in a residential transaction nor does marketable title depend on the type of property being sold. Knowledgeable title insurance professionals understand that residential properties must be chained back for at least 42 years to be insurable while most commercial title searches are between 60 and 100 years.

Understanding the MTA

Now that we know what makes a title “marketable,” let’s explore the MTA. The Ohio General Assembly enacted the MTA in 1961 to extinguish interests and claims in land that existed prior to the root of title to simplify and facilitate land transfers by allowing buyers to rely on a record chain of title. Once an interest or claim in land has been ruled out under MTA, it cannot be revived.

The Root of Title

The RC defines the “root of title” as that conveyance or other title transaction in the chain of title of a person, purporting to create the interest claimed by such person, upon which he relies as a basis for the marketability of his title, and which was the most recent to be recorded as of a date forty years prior to the time when marketability is being determined. (R.C. Section 5301.47 et seq.) A buyer can rely on the root of title for marketability unless a saving event has occurred. (R.C. Section 5301.52) This would require the filing of a notice in the appropriate real estate records effectively “saving” the interest or claim in the land. The appropriate form of saving event affidavit can be found in R.C. 5301.52.

Exceptions to the MTA

There are several other instances in which MTA does not apply, including, but not limited to, any easement or interest in nature of an easement created or held for any railroad or public utility; any right, title, or interest of the United States, Ohio, or any political subdivision, body politic, or agency of the United States of Ohio; and any right, title, estate, or interest in coal and any mining or other rights exercisable in connection with any right, title, estate, or interest in coal (although the issue of using the MTA to extinguish mineral rights has been hotly debated by the Ohio Supreme Court in recent years and will most likely continue to be under scrutiny by our state’s legal system).

Case Study: Birchway’s Experience

This is all good and well, but what do these definitions mean in practice? Here at Birchway, we recently completed a research project for a client whose property is encumbered by residential restrictions placed on the property in 1956. In this client’s case, MTA was not able to be used as there is not a deed out of the 1956 owner that’s been of record for over 40 years that does not include the restrictions, so the deed containing the restriction is the “root of title” and the MTA does not eliminate the restrictions on the property. Both the client and Birchway ended up with a new understanding of MTA – knowledge which we can now pass on to other clients and industry colleagues. Although MTA was not a solution for this clients, another solution was identified. Each situation presents new challenges and new opportunities. 

Questions or comments? Please feel free to reach out to Molly Bogner Wells, Esq. at mwells@birchwaytitle.com.

About Birchway Title Agency, LLC

Birchway was founded with a vision for the future of the title industry supported by years of real estate experience. We are committed to assisting our clients navigate the complexities of commercial and residential real estate transactions with ease and confidence. For more details, visit: www.birchwaytitle.com or contact info@birchwaytitle.com for questions regarding publications and media.