Chapter: Which type of deed provides the greatest protection to the grantee (buyer)? (EN)

Chapter: Which Type of Deed Provides the Greatest Protection to the Grantee (Buyer)?

1. Introduction: Deeds and Conveyance of Property

• A deed is a legal instrument that transfers ownership of real property from a grantor (seller) to a grantee (buyer). The level of protection offered to the grantee varies significantly depending on the type of deed used. Understanding these variations is crucial for informed real estate transactions.
• The primary function of a deed is to convey title, which represents the bundle of rights associated with ownership, including the right to possess, use, enjoy, and dispose of the property.

2. Types of Deeds and Their Covenants

The level of protection offered by a deed hinges largely on the covenants (promises or guarantees) the grantor makes regarding the title being transferred. These covenants aim to protect the grantee from future claims or defects in the title. We’ll examine several types of deeds, ordered roughly from greatest to least grantee protection.

2.1 General Warranty Deed

• Definition: A general warranty deed offers the highest level of protection to the grantee. The grantor warrants the title against all defects, regardless of whether they existed before or during the grantor’s ownership.

• Covenants: General warranty deeds typically include the following five covenants:

  1. Covenant of Seisin: Grantor warrants they own the estate they are conveying. Mathematically: Existence(Grantor’s Title) = True. This asserts that the grantor possesses the estate and has the legal right to convey it.
  2. Covenant of Right to Convey: Grantor warrants they have the right to convey the property. This is distinct from seisin because the grantor might have seisin but lack the right to convey due to restrictions. RightToConvey(Grantor) = True.
  3. Covenant Against Encumbrances: Grantor warrants the property is free from encumbrances (e.g., liens, mortgages, easements) not specifically listed in the deed. The grantor represents that: Sum(Encumbrances) = ListedEncumbrances. If this is not true, the grantee can sue for damages.
  4. Covenant of Quiet Enjoyment: Grantor warrants the grantee will not be disturbed in their possession of the property by someone with a superior claim of title. This is a future covenant, triggered by a disturbance. If Disturbance(Grantee, SuperiorClaim) = True, then the covenant is breached.
  5. Covenant of Warranty: Grantor warrants they will defend the grantee’s title against any lawful claims of title by others. This is also a future covenant. The grantor is guaranteeing protection against future claims.

• Grantee Protection: The general warranty deed provides the greatest possible protection to the grantee because the grantor is liable for title defects arising at any point in the property’s history.

• Practical Application: A title search and title insurance policy are typically used in conjunction with a general warranty deed to further mitigate risk. The title search investigates the chain of title, and the title insurance policy insures against undiscovered defects.
• Example: If a hidden lien from a prior owner surfaces after the conveyance, the grantor is obligated to defend the grantee’s title or compensate them for any losses incurred in clearing the title.

2.2 Special Warranty Deed

• Definition: A special warranty deed offers less protection than a general warranty deed. The grantor only warrants the title against defects that arose during the grantor’s ownership.
• Covenants: Similar to general warranty deeds, but the covenants are limited to the grantor’s period of ownership. The phrases “by, through, or under me” or similar language often appears.
  1. Limited Covenant of Seisin: Grantor warrants that during their ownership, they owned the estate they are conveying.
  2. Limited Covenant of Right to Convey: Grantor warrants that during their ownership, they had the right to convey the property.
  3. Limited Covenant Against Encumbrances: Grantor warrants that during their ownership, the property was free from encumbrances not specifically listed in the deed.
  4. Limited Covenant of Quiet Enjoyment: Grantor warrants the grantee will not be disturbed in their possession of the property by someone with a superior claim of title that arose during the grantor’s ownership.
  5. Limited Covenant of Warranty: Grantor warrants they will defend the grantee’s title against any lawful claims of title by others that arose during the grantor’s ownership.
• Grantee Protection: The grantee is protected from defects caused by the grantor but bears the risk of defects that existed before the grantor took ownership.
• Practical Application: Special warranty deeds are commonly used by corporations or executors of estates, as they are hesitant to warrant title for periods beyond their direct control.
• Example: If a previous owner created an easement that was not recorded, and the current grantor was unaware of it, the special warranty deed offers no protection to the grantee. The grantee would have to seek recourse from the prior owner who created the easement, if possible.

2.3 Bargain and Sale Deed

• Definition: A bargain and sale deed implies that the grantor holds title to the property but does not provide any warranties regarding the title’s quality or freedom from encumbrances.
• Covenants: Typically, there are no express warranties associated with a bargain and sale deed. The grantor is essentially saying, “I own the property, and I’m selling it to you.”
• Grantee Protection: The grantee receives very limited protection. They are relying solely on their own due diligence (title search, etc.) to uncover any title defects.
• Practical Application: Bargain and sale deeds are sometimes used in foreclosure sales or tax sales, where the grantor (e.g., a bank or government entity) is unwilling to provide any warranties.
• Example: If there is an existing mortgage on the property that the grantor failed to disclose, the grantee is responsible for paying it off, even if they were unaware of its existence.

2.4 Quitclaim Deed

• Definition: A quitclaim deed conveys whatever interest the grantor may have in the property, but it does not guarantee that the grantor has any interest at all.
• Covenants: There are no warranties or covenants associated with a quitclaim deed. The grantor is simply relinquishing any claim they might have.
• Grantee Protection: The grantee receives the least amount of protection. They are essentially buying whatever rights, if any, the grantor possesses.
• Practical Application: Quitclaim deeds are often used to clear up title defects (e.g., correcting a name on a prior deed) or to transfer property between family members, where the parties are familiar with the title history.
• Example: If the grantor has no ownership interest in the property, the quitclaim deed conveys nothing to the grantee. The grantee receives no recourse. If the grantor owns 10% of the property, only that 10% is conveyed.

3. Title Insurance: Additional Protection

• Title insurance provides financial protection against losses arising from title defects. A title insurance policy insures the grantee (owner’s policy) and/or the lender (lender’s policy) against undiscovered title problems, such as liens, encumbrances, or competing claims.
• Even with a general warranty deed, title insurance is recommended because it provides a separate layer of protection and can cover defects that even the most diligent title search might miss.
• The premium is usually a one-time payment at closing, and the policy remains in effect for as long as the insured owns the property (owner’s policy).

4. Due Diligence: Minimizing Risk

• Regardless of the type of deed used, the grantee should always conduct thorough due diligence to minimize the risk of title defects. This includes:
  1. Title Search: A comprehensive examination of public records to identify any potential title problems. This process typically involves examining deeds, mortgages, liens, judgments, and other relevant documents. The depth and accuracy of the title search are critical.
  2. Survey: A professional survey of the property to verify its boundaries and identify any easements, encroachments, or other issues that might affect the title.
  3. Property Inspection: A physical inspection of the property to identify any visible defects or issues that could affect the title (e.g., boundary disputes, unrecorded easements).

5. Mathematical Representation of Deed Protection

We can qualitatively represent the level of protection offered by each type of deed using a Protection Factor (PF), ranging from 0 (no protection) to 1 (maximum protection):

• General Warranty Deed: PF = 1
• Special Warranty Deed: 0 < PF < 1 (Protection depends on the grantor’s ownership period and activity.) The PF is greater for shorter periods of ownership as there are fewer chances for encumbrances.
• Bargain and Sale Deed: PF ≈ 0.2 (Minimal implied protection from the mere act of conveying.)

• Quitclaim Deed: PF = 0

• This representation is simplified but illustrates the relative levels of protection. In a real-world scenario, the actual protection level depends on specific circumstances and the laws of the jurisdiction.

6. Evolution of Deed Types: A Historical Perspective

• Deed types have evolved over time to meet the changing needs of society and the complexities of land ownership. The general warranty deed emerged as a standard form to provide greater certainty and security to buyers. Special warranty deeds developed as a compromise, offering some protection while limiting the grantor’s liability. Quitclaim deeds have existed for centuries and serve the purpose of transferring uncertain or ambiguous interests.

7. Conclusion: Selecting the Appropriate Deed

• The general warranty deed provides the greatest protection to the grantee (buyer) because the grantor warrants the title against all defects, regardless of when they arose. However, the choice of deed should depend on the specific circumstances of the transaction, the parties involved, and the applicable laws.
• Combining a general warranty deed with a thorough title search and title insurance policy provides the strongest possible assurance of clear and marketable title. Due diligence remains paramount, regardless of the deed type.