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Massachusetts Agencies

Duty to Disclose Encumbrances to Buyer

Purchase and Sale Agreements

G.L.c. 184, §21 is a very interesting statute:

If real property upon which any encumbrance exists is conveyed by deed or mortgage, the grantor, in whatever capacity he may act, shall before the consideration is paid, by exception in the deed or otherwise, make known to the grantee the existence and nature of such prior encumbrance so far as he has knowledge thereof.

Putting aside the question of how this statute collides with the one having to do with quitclaim covenants, it seems that regardless of what duty the seller has to disclose encumbrances, a complete failure of title or a known colorable claim that the seller has no title do not have to be disclosed, because they are not "encumbrances." See Security Title and Guaranty Co. v. Mid-Cape Realty, Inc., 723 F.2d 130 (CA 1993). The federal court noted that the statute's result of placing the risk of a bad title upon the buyer is minimized because of the "comprehensive title recording system" in Massachusetts.