A recorded lease or notice of lease containing a purchase option does not impair marketability of title if all of the following conditions have been satisfied: (a) the option to purchase does not extend past the lease term; (b) the lease term has expired or has otherwise been terminated; (c) the statute of limitations on enforcing the option has lapsed (see, Comment 3); (d) the tenant is no longer in possession or control of the demised premises; and, (e) there is no record evidence of the tenant asserting its purchase rights. If the lease or recorded memorandum of lease specifies that the option terminates when the lease terminates, then evidence of the termination of the lease establishes that the option is no longer in effect.
Comment 1: It is not unusual for a lease to grant to the tenant an option to purchase the property at some future point in time. Questions can arise, however, as to whether the option endures and is enforceable beyond the lease expiration.
Comment 2: If the title is to be deemed marketable, inquiry must be made regarding any tenant whose lease or memorandum of lease references a purchase option and who has not been out of possession of the property for at least six years, and such inquiry must confirm that the tenant is not asserting any claim under the purchase option.
Comment 3: The question whether the option in a lease creates a contract right or a property right is undetermined in Vermont. If the option is treated as a contract right the statute of limitations would be six years and if the option creates an interest in property, then the statute of limitations would be fifteen years. Until the Supreme Court or the Legislature determines otherwise, a fifteen-year statute of limitations is recommended.
History
September 2024: Standard added.