A deed is a legal document that conveys a property title to you after buying real estate. Your new deed becomes effective and binding when you receive it and confirms that you are the current owner of the property purchased. The same rules apply to commercial real estate deeds. You can find an example of such a deed in the form of the general warranty deed form.
Deeds further shield you and your property against third-party claims after taking ownership. A special warranty deed explicitly protects buyers from legal action or title issues stemming from the acts of the property’s current owner.
Let’s examine special warranty deeds in detail and discover how they can secure your interests when investing in real estate.
Simply put, a special warranty deed (a.k.a. limited warranty deed) assures the real estate buyer that the seller actually owns the property and that seller’s property title has not faced legal challenges during his or her possession. The seller, however, makes no guarantees about any period before taking ownership. This is often a complex subject, so it can be extremely valuable to consult with a lawyer near you.
Real property sometimes has debts like mortgages or liens attached to it. These legal obligations become part of the existing title until the property owner satisfies the debts. Encumbrances thus may follow the property after a grantor sells it.
A special warranty deed legally transfers real estate title and ownership to you and includes the following guarantees from the property’s previous owner:
The seller holds a clear title to the property.
During possession of the property or after receiving the proper title, the seller disdained from acts that could leave the asset open to third-party claims or litigation.
Third-party or business entities do not hold present or future interests in the property.
No outstanding liens or mortgages exist against the asset.
During possession of the property or after receiving the proper title, the seller guarantees a third party never acted in a manner that could negatively affect your ownership.
The courts will enforce a properly executed special warranty deed only when it holds the following requisite legal elements:
The document must display the seller’s (grantor’s) legal name and address.
The buyer’s (grantee’s) legal name and address must also appear on the deed.
The special warranty deed must include a statutory description of the property.
The grantor must declare that he/she is the legal owner and holds the right to convey the property to the grantee.
The grantor must affirm that no creditors or any other person held claims to the property while he/she owned the asset.
The grantor must claim a clear and unencumbered title and assert that the grantor’s warranties are limited only to the time the grantor owned the property.
For drafting legal documents, you can refer to other real estate-related templates available online.
Special warranty deeds are unique and not commonly used for residential real estate sale transactions. This means that you will probably not receive a special warranty deed after purchasing a family home or an apartment — grantors execute general warranty deeds for these types of real estate investments.
However, most grantees handling Will and Trust matters protect themselves by issuing special warranty deeds to parties who inherit property.
When a loved one passes away, his or her estate often moves to probate court for proper distribution among heirs and beneficiaries. Probate judges assign executors (when a Will exists) or court-appointed fiduciaries (when the estate is intestate) to pay the deceased’s debts and re-title remaining real estate assets, according to the law.
Obviously, the law should not hold executors legally responsible for faults or defects found in a deceased’s property title since these fiduciaries never owned or possessed the real estate held in probate. The rules of special warranty deeds come into play in this situation. The legal document limits an executor’s warranties of clean title only to the time the fiduciary worked on the probate matter.
Business entities may similarly use special warranty deeds when they cannot offer buyers comprehensive warranties or protections.
For example, a bank forecloses on a home but is unfamiliar with the property’s creditor history or third-party future interest claims. The bank consequently can only make guarantees about the property during the time it repossessed and resold the property — executing a special warranty deed to the buyer thus protecting the entity from possible future litigation.
Commercial properties often switch owners, handle commercial liens, or manage bank foreclosures, situations that call for sellers of commercial real estate to execute special warranty deeds to protect their interests.
Unlike special warranty deeds, other deeds come with no warranties and no guarantees about the property at all. These are classified as non-warranty deeds. When you evaluate the level of protection (warranty) you have when purchasing a property, non-warranty is at the bottom, with nothing.
Then, there are quitclaim deeds. Contrary to special warranty deeds, quitclaim deeds make zero promises about the property, its condition, or what the current owner did or did not do to it. Moreover, with a quitclaim, there is no promise that the current owner has an interest in the property they are selling. There are also general warranty deeds which, as the name suggests, apply to available levels of protection.
In general, a special warranty deed differs from other deeds in two key ways:
A special warranty offers some level of protection or warranty, and it applies to commercial real estate.
The time frame is shorter compared to general warranties. General warranties might promise no defects in the property at any time since it was first owned, but the special warranty only extends this guarantee to the current ownership.
A special warranty deed offers buyers limited guarantees and only covers a specific period. Let’s consider the pros and cons of executing the special warranty deed.
Protects buyers from title considerations when purchasing or inheriting a property.
Special warranty deeds facilitate the transfer of property when the current owner cannot vouch for the property debts of previous owners.
Only guarantees clear property title or encumbrance relief during the time that the grantor owned the property.
Involves additional costs for sellers.
Does not cover claims made before the seller obtained the title.
Today, we touched on the meaning of special warranty deeds and the implications of executing these legal documents when purchasing real estate. For more comprehensive information about special warranty deeds and other types of legal documents, you may visit Lawrina.
Grantors who convey special warranty deeds issue a guarantee against defects in clear title only during their ownership. In other words, the seller doesn’t protect against debts or liens against the property that existed before taking possession of the asset.
Residential property buyers generally will not receive a special warranty deed from the seller. However, you will most likely accept this deed when buying commercial property, purchasing assets in foreclosure, or obtaining real property held in probate.
Inna Chumachenko is the Content Lead at Lawrina. She is responsible for managing all the content found on the blog, guides, and other website pages. Inna has a degree in philology and a vast interest in law. In her role at Lawrina, Inna oversees the content team, establishes collaborations with writers, and curates content from various contributors.
Business entities working with real estate transactions or fiduciaries who transfer property ownership to beneficiaries often execute special warranty deeds to buyers. Doing so shields these sellers against legal claims from the property’s previous owners.
Sellers often retain an estate attorney to draft a special warranty deed for the buyer. This practice ensures that the document conveyed satisfies both legal and statutory requirements. Special warranty deeds are also known as covenant deeds, grant deeds, and limited warranty deeds among the attorneys who draft them.
A special warranty deed does not guarantee that the purchased property is free and clear of debts from prior owners. Buyers who obtain this type of deed must buy additional title insurance to protect themselves from hidden liens or claims unknown to the current seller.
Quit Claim Deed is a legal document used to transfer property ownership from one person to another. Unlike a warranty deed, which guarantees the title being transferred is free of any liens or encumbrances, a quitclaim deed makes no such guarantees. It essentially transfers any ownership interest the grantor may have in the property to the grantee but does not make any promises about the validity of that ownership interest.