When people transfer property there are several kinds of deeds available. Each type provides a purchaser with a different level of protection and holds a seller responsible for none, some or all defects that arise after the transfer. Two types of deeds are warranty (or general warranty) and special warranty.
The warranty, or general warranty, deed is the deed most commonly used to transfer ownership of real property. The seller, also called the “grantor,” must show that there are no defects in title before the property is sold. Defects preventing a sale can include judgments, tax liens, mechanic’s liens or outstanding mortgages. After a title search, if none of those issues arise, the property can be transferred to the purchaser, also called the “grantee.” However, with a warranty deed, if any title defects are discovered after the property is sold, the grantor is responsible for the cost to repair those defects even when they did not create the defects or the defects existed before the grantor purchased the property.
The grantor, when he signs a warranty deed, promises several things called “covenants” upon the property transfer. When the purchaser discovers that any of those covenants are broken, the grantor is liable. The first three are present covenants because if a grantor has misrepresented himself in any way, the covenants are broken immediately upon the transfer. Present covenants include: (1) the grantor actually owns the property, (2) the grantor is authorized to transfer ownership of the property and (3) the only “encumbrances” or defects in title are already known and included in the current deed.
The other covenants, called future covenants, may be broken at any time after the transfer. First, the covenant of seisen means that the grantor had “superior title” when the property was sold, so anyone else claiming ownership will not prevail. If they do, the grantor will be required to pay damages to the purchaser. The covenant of quiet enjoyment promises that the purchaser will be free to use and enjoy his property without disturbance. The covenant of future assurances means that if any documents are needed to ensure clear title, the grantor will sign them or have any other necessary parties sign them.
Special Warranty Deeds
The special warranty deed limits the grantor’s liability for title defects arising after the property is transferred. A special warranty deed can be identified by the language: “by, through or under the grantor, but not otherwise” or “the grantor remises, releases, alienates and conveys.” When property is transferred using a special warranty deed, if a title defect is found, the grantor is only responsible for costs related to defects that came into existence while he owned the property. If it is discovered that the defects already existed when the grantor purchased the property, the grantor is not liable for costs or damages. The special warranty deed also releases the grantor from any responsibility for defects that arise after the property is transferred to the purchaser.