I hate to answer for other breeders, but from my point of view, it's a safety issue. But:
As for Kris and I, we don't require a fenced yard. However, when we first talk to people on the phone that inquire about puppies, we always ask if they have a fenced yard. If they don't, they get the "third degree" to be sure they understand the importance of protecting the dog, walking, etc., etc. If we don't feel comfortable with the answers, we would not sell a puppy to them. Having said that, as far as I know, we have only once decided not to sell someone a puppy but there were other issues about the person we did not feel comfortable with.
We also don't want to see the electronic fences; I think it gives some owners a false sense of security . Our problem with those is that they don't keep other dogs away from your dog and we have heard of dogs that run through the fence and can't get back, or the collar fails, and so on.
MishathePooh and others that have run into this, I do sympathise with you (which is why we don't require the fence) because we were in your shoes years back when we were looking for our first Cavalier. Not only did we not have a fenced yard, but we lived in a duplex and rented out the other side. Two strikes against us! Took a lot of talking to convince a breeder to sell us a puppy.