A warranty deed is used when real estate titles transfer to a new owner. The deed guarantees the title is clean and that there are no creditor judgments or tax liens attached which could interfere with the property transfer. Two types of warranty deeds are used to transfer property and include General Warranty Deed or Limited Warranty Deed.
A warranty deed is executed between two parties which include the Grantor (seller) and the Grantee (buyer). When deeds are transferred they must be recorded through the County Recorder’s office. Deeds must be recorded in a timely fashion or Grantees could lose protection of the deed, along with the option to pursue Grantors if problems surrounding the real estate arise.
General Warranty Deed
A general warranty deed guarantees the Grantor owns the property and is authorized to sell it. Warranty deeds protect the Grantee in the event the Grantor does not fully disclose items which could interfere with the sale. These might include non-disclosure of liens and judgments, mortgage claims, or shared ownership in the property.
General warranty deeds include six covenants (binding agreements) which fall into the category of present or future. Three present covenants exist including: Covenant of Seisin, Covenant of Right to Convey, and Covenant against Encumbrances. Future covenants include: Covenant of Warranty, Covenant of Quiet Enjoyment, and Covenant of Further Assurances.
Present Covenants
Covenant of Seisin and Covenant of Right to Convey serve as a promise that the Grantor either has full ownership of the real estate or has the right to convey it under some type of legal rights such as power of attorney or as the estate executor of a probate estate or trust. Covenant against Encumbrances is used by Grantors as a promise that there are no undisclosed liens, judgments, or mortgage claims against the property.
Future Covenants
Covenant of Warranty and Covenant of Quiet Enjoyment serve as a promise to the Grantee that rights to the property will not be disturbed due to liens, judgments, or mortgage claims and that all defects, if any, have been completely disclosed. Together, these two covenants protect the Grantee from future property claims. The Covenant of Further Assurances protects the Grantee if the warranty deed is imperfect and prohibits the Grantee from obtaining a new real estate title.
Limited Warranty Deed
A limited warranty deed is also referred to as a special warranty deed. Regardless of the name, this type of real estate deed only offers limited protection to the Grantee.
Limited warranty deeds offer a promise about the property for the period of time real estate was owned by the Grantor. If title problems surround ownership of the real estate prior to the Grantor owning it, the Grantee cannot pursue the Grantor for damages.
The exception to this rule is if the Grantee can provide evidence that problems existed during the time the Grantor owned the property. Since this can be difficult to prove, it is recommended to obtain a general warranty whenever possible.
Both general and limited warranty deeds must be recorded through the County Recorder office to be legally binding. Warranty deeds should be drafted by a real estate attorney and recorded through the county court where the property is located.
When buying real estate it is crucial to conduct due diligence to ensure the Grantor holds legal title and that no liens or judgments are attached. Recording warranty deeds ensures Grantees are protected in the event that problems arise with title transfer or property defects.
Sources:
Covenant Law Definitions
