What Is a Hubbard Clause in Real Estate?

When you're buying or selling property, you'll encounter plenty of legal terms that can feel overwhelming. 

One clause that shows up in certain real estate transactions is the Hubbard clause, and understanding it could save you time and money. 

Let's break down what this clause actually does and why it matters for your property deal.

Understanding the Hubbard Clause Basics

A Hubbard clause is a provision in real estate contracts that allows a buyer to terminate the purchase agreement if the seller cannot provide clear title to the property by a specified deadline. 

This clause acts as a safety net for buyers who want protection against unexpected title issues that might arise during the closing process. Rather than being stuck with a property that has ownership disputes or liens, the buyer can walk away if these problems cannot be resolved in time.

The clause gets its name from court cases that established this legal principle, and it's primarily used in commercial real estate transactions, though it can appear in residential deals as well. 

The basic premise is straightforward: both parties agree that if the seller's title isn't marketable by a certain date, the buyer has the right to cancel without penalty. This protects buyers from inheriting someone else's legal problems and gives sellers a clear deadline to fix title issues.

Key points about Hubbard clauses:

• Protects buyers from accepting property with defective titles
• Establishes a specific deadline for resolving title problems
• Allows buyers to exit the contract without losing their earnest money deposit
• Common in commercial real estate but can appear in residential transactions
• Shifts some of the burden of title clearance to the seller
• Requires clear definition of what constitutes acceptable title

How Hubbard Clauses Work in Practice

When a Hubbard clause is included in your purchase agreement, it creates a specific timeline and set of expectations for everyone involved. Here's how to navigate this provision effectively:

1. Review the title deadline carefully. The clause will specify a particular date by which the seller must deliver clear, marketable title to the property. Make sure this deadline gives the seller enough time to resolve issues but protects you from indefinite delays. Common timeframes range from 30 to 60 days before closing.
2. Request a preliminary title report early. Don't wait until the last minute to discover title problems. Ask your title company to provide a preliminary report as soon as possible after making an offer. This gives the seller time to address issues like outstanding liens, easements, or ownership disputes before the deadline passes.
3. Document all title exceptions in writing. Your contract should clearly spell out which title exceptions are acceptable to you and which ones must be cleared. Exceptions might include utility easements, HOA covenants, or existing mortgages. Getting this in writing prevents disagreements later about what counts as a defective title.
4. Communicate with the seller about remedies. If title issues emerge, work with the seller to develop a solution rather than immediately invoking the termination clause. Sellers might need to pay off liens, resolve disputes with previous owners, or obtain title insurance exceptions. Open communication often leads to faster resolutions.
5. Prepare your exit strategy if needed. If the seller cannot clear title by the deadline, understand your rights to terminate the contract and recover your earnest money deposit. Have your real estate attorney confirm that all conditions have been met before officially exercising the termination clause.

Frequently Asked Questions

Who typically uses Hubbard clauses?

Commercial real estate investors and developers rely on Hubbard clauses more than residential homebuyers, but the clause can appear in any real estate transaction where the buyer wants title protection. Properties with complex ownership histories or potential liens are especially likely to include this provision.

What happens to my earnest money if I use the Hubbard clause?

If you properly terminate the contract by invoking the Hubbard clause before the deadline, your earnest money deposit should be returned to you in full. This is the whole point of the clause—it allows you to exit without financial penalty if the seller cannot deliver clear title.

Can a Hubbard clause be negotiated?

Yes, almost every term in a real estate contract is negotiable, including the Hubbard clause. You can adjust the deadline, specify which title defects are acceptable, or add conditions about how the seller must address title issues. Work with your real estate attorney to customize this clause for your specific situation.

What's the difference between a Hubbard clause and title insurance?

Title insurance protects you after closing by covering losses from title defects, while a Hubbard clause prevents you from closing if title defects exist. They serve different purposes—one stops problems before they happen, and the other compensates you if problems occur afterward. Most transactions use both for maximum protection.

How much time should the Hubbard clause deadline allow?

Most real estate professionals recommend allowing 30 to 60 days before closing for the seller to clear title. The exact timeframe depends on the complexity of the title issues and local practices. Commercial properties with more complex issues might need longer timeframes.

Next Steps for First-Time Buyers

If you're considering a property purchase and a Hubbard clause has been mentioned, treat it seriously as part of your due diligence. 

This clause exists specifically to protect you, so don't skip the title review process or accept vague promises from the seller about clearing issues later. Request that preliminary title report right away, review it carefully with your attorney, and make sure you understand exactly what title defects must be resolved before the deadline.

Taking these steps now will save you from major headaches down the road. Real estate transactions involve significant financial and legal commitments, so having clear, enforceable protections like a Hubbard clause is just smart business. 

Work with an experienced real estate attorney who can customize this clause for your specific situation and make sure all parties understand their obligations.