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 actually legal documents and they have very different legal outcomes. 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. A quit claim deed, on the other hand, is one in which the seller doesn’t guarantee that he or she holds title to a piece of real estate.
Quit Claim Deeds
A grantor or seller is quitting any claim of interest that they have to 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.
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 a 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 at a later date, the grantee actually 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 Deeds and Covenants
The other type of deed, again, is the warranty deed. 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 rights to transfer property free of any other claims to 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;
- The first one’s called a covenant or a 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 actually breaching the warranty because they really don’t have possession of the property. Okay, see how that works.
- The second covenant is called a 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 to 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.
- The third covenant is called the Covenant Against Encumbrances
And that 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 to take care of and defend that property.
- A covenant of a Warranty of Title basically is a future covenant. This one basically says I will agree to the grantee to defend, and I have a duty to defend the grantee against any claims to the property.
- The fifth covenant is called the Quiet Enjoyment Covenant. This is one where the grantor covenants to the grantee that the grantee will have unimpaired use and unrestricted enjoyment to 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.
- Finally, there’s something called the Covenant of Future Assurances. That’s where the grantor takes actions reasonably necessary to protect the grantor’s title. If there’s an issue with regards to a legal description or if something was not done correctly with regards to 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.
So if you’re a buyer of a property, you’re always going to want to strive to take a warranty deed. Whereas if you’re a seller, you’re going to 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 when it comes to 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. 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.
Regardless of the level of protection offered by either deed, both deeds can and do have the effect of conveying property. So if you’re unsure of which deed suits your needs, then you should really contact a competent real estate attorney.
I’m David Soble. I’m a Michigan real estate and finance attorney and I can be reached at 888.789.1715 or www.provenresource.com