I’m often asked the difference between a warranty deed and a quit claim deed. Both convey or purport to grant title to property, but they’re legal documents and they have very different legal outcomes.
Warranty Deed – Guarantee
First, a warranty deed is a type of deed where the grantor guarantees that he or she holds clear title to a piece of property and that they have a right to sell or to convey it to a grantee.
Quit Claim Deed – No Guarantee
A quit claim deed is one in which the seller doesn’t guarantee that he or she holds title to a piece of real estate.
Quit Claim Deed Within Families
A grantor or seller is quitting any claim of interest that they have in a property. That’s where we get the name quit claim deed. They may not have any interest in the property, but because they’re not making any warranties, they have no legal responsibility to a grantee. So when is it appropriate to use a quit claim deed?
Well, attorneys and title companies most often use quit claim deeds when transferring property between relatives or family members, such as a father to a son, a mother to a daughter. It can be used when a spouse or somebody is getting married or when spouses are divorcing. You pretty much know the people who you’re dealing with and that you’re hoping that you can trust them, that they own the property. So really, no warranties or representations are necessary.
Quit Claim Deed for Defect on Title
We also use quit claim deeds in a real estate mortgage situation, where correcting a title defect or an issue between the parties. Again, the parties are known to each other and also to the title company, so usually the quit claim deed is used to take somebody off title. It can also be used to make a minor correction to a legal description or a misspelling of a name. Also, if there’s a notary defect such as a date or commission, it can be corrected with a quit claim deed. So again, with a quit claim deed, title is transferred between family members most often, or it’s used to clear a defect on title. If there is a defect or problem with the grantor’s title later, the grantee has no legal recourse against a grantor for any defect because, again, the grantor made no warranties or representations as to the marketability or the cleanliness or validity of title that’s needed to convey a legal interest.
Warranty Deed – Guarantee
A warranty deed is a type of deed where the grantor guarantees that he or she holds clear title to a piece of property and that they have a right to sell or to convey it to a grantee.
Covenants and Warranty Deeds
Warranty deeds provide the grantee with the greatest amount of protection concerning the validity of title. The grantee makes these warranties that they have the right to transfer property free of any other claims to the property; otherwise they’re going to be responsible to the grantee to correct that defect.
So in the warranty deed, there’s actually six covenants that are implied covenants or promises, and they’re made by the grantor to the grantee. And they are, as follows;
Covenant of Promise of Seisen
The grantor basically covenants to the grantee that the grantor has title and possession of the property. So if the grantor has a lease on the property and they convey the property with a warranty deed, they are breaching the warranty because they really don’t have possession of the property.
Covenant to Right to Convey
The grantor covenants to the grantee that the grantor can validly grant or convey the property. So, again, if the grantor owned the property jointly with another party, you might need to have both parties convey the title. But if only one person signs off on the deed, guess what? It’s going to be the grantors responsibility to get that other person to sign off.
Covenant Against Encumbrances
This basically is a promise to the grantee that any mortgage, lien, easement, or other encumbrance on the property does not exist. So the warranty deed basically will protect the grantee against any underlying encumbrances. And if they don’t, the grantor is responsible for taking care of and defending that property.
Covenant of Warranty of Title
This is a future covenant. It basically states that I will agree to the grantee to defend, and I have a duty to defend the grantee against any claims to the property.
Covenant of Quiet Enjoyment
This is where the grantor covenants to the grantee that the grantee will have unimpaired use and unrestricted enjoyment of the property. So if there’s an easement on the property, and the grantor knows this easement is going to interfere with the grantee’s quiet enjoyment or use, the grantee can go after the grantor. And the grantor has to correct that issue.
Covenant of Future Assurances
That’s where the grantor takes actions reasonably necessary to protect the grantor’s title. If there’s an issue regarding a legal description, or if something was not done correctly about a notary or name, the grantor is going to take care of it. So the quit claim deed comes again with none of these warranties; only the warranty deed.
Buyer of a Property – Warranty Deed
If you’re a buyer of a property, you’re always going to want to strive to get a warranty deed.
Seller of a Property – Quit Claim Deed
If you’re a seller, you’d rather give a quit claim deed to convey a property so that you don’t have that high threshold of legal responsibility. Again, with a quit claim deed, there’s less legal responsibility, if any, and regarding negotiating a purchase contract or refinancing a property, attorneys, buyers and lenders are going to want to see a warranty deed with all of those six warranties.
Whereas the seller, when they’re unsure of a property’s title, they’re going to look to try and give a quit claim deed. A lot of investors these days take quit claim deeds.
“Special” Covenant Deed
Sometimes a quit claim deed and a warranty deed aren’t even acceptable to either party. And so another deed that attorneys arrange is called a special covenant deed. And this is a conveyance where it doesn’t have all the warranties in the deed, so they’re not all the guarantees. But again, it’s just one level up above a quit claim deed, so it will give some level of protection of title.
Which Deed Suits Your Needs?
Regardless of the level of protection offered by either deed, both deeds can and do cause conveying property. So if you’re unsure of which deed suits your needs, then you should really contact a competent real estate attorney.