Deeds: A Short Form That Anyone Can Create, Right?
Deeds are an essential part of every real estate transaction. A deed is a written instrument that evidences the transfer of title to real property from one party to another. There are various types of deeds wherein different warranties of the condition of title are made. Though generally only one or two pages, deeds contain a lot of important and precise information relating to the transaction. This information includes the name of the grantor, the party transferring the property, and the name of the grantee, the party receiving the property. A deed also must include a specific legal description of the property and may identify certain restrictions and burdens to which the land is subject, identify easements, or contain other information such as an acknowledgement of unpaid property taxes. Lastly, a deed must be signed with certain formalities and delivered to the grantee.
Types of deeds: Warranty deeds are a type of deed generally used when property is being transferred in an arm’s length sale. A warranty deed expressly guarantees that the grantor has the right to sell the property. A warranty deed also includes the grantor’s pledge to defend title against the claims of all third parties. If title is later discovered to be defective, the grantor will compensate the grantee for any resulting damages. The guaranties in a full warranty deed extend to all prior title transfers in the chain of title and, therefore, a real estate buyer is best protected with a warranty deed.
In some cases, a special warranty deed is delivered by a seller. With a special warranty deed, the grantor only warrants against title defects which occurred during the tenure of the grantor’s ownership and specifically excludes any title defects that existed before the grantor’s ownership of the property. For this reason, investors, banks, developers, and builders routinely use these types of deeds to transfer real estate to another person because there is no responsibility on the grantor to correct title defects predating their ownership.
Finally, a quitclaim deed conveys whatever interest the grantor has in real property, but does not warrant that the grantor has good and valid title to the property. Quitclaim deeds are usually employed in related-party transactions where there is no arm’s length sale, e.g., a transfer of title to family member, in connection with a divorce, in certain estate planning transactions, or to clear or correct a prior title defect. A quitclaim deed is just as effective at transferring title, but should be accepted only where the grantee knows the state of the grantor’s ownership interest in the property and is confident that the grantor will correct any title defects.
Legal description: A deed must specifically identify the property with a legal description in the form of a “lot and block” or “metes and bounds” description. Lot and block descriptions are typical in communities with subdivided land parcels (e.g., within a municipality or developed community). Metes and bounds descriptions are used by public surveyors to identify real estate by a beginning point followed by a series of directions and instructions to work around the perimeter of the property. The statement of the legal description within or incorporated into the deed is crucial to the transfer of the property. Florida courts have held that use of a property’s street address alone is insufficient to identify the real estate.
Covenants and Restrictions: A deed will often delineate certain covenants or restrictions attached to the land. For instance, a deed may reference a recorded declaration of covenants in relation to a condominium or homeowner’s association which places specific responsibilities and limitations on the property’s use. The deed may reference public or utility easements or some other restriction affecting the owner’s use.
Signature, delivery and recording: To be valid, a deed must be signed by the grantor and any necessary joining parties (e.g., a spouse if the primary residence is being sold) in the presence of two subscribing witnesses. Once executed, the deed must be delivered to the grantee. Recording the deed is presumptive evidence of delivery and provides notice to all would be claimants against the land of the grantee’s ownership interest. If a deed is not recorded, then it is known as a “wild” deed and could wreak havoc on later transfers since the deed will not be found within the chain of title.
Title Insurance: Now that you have the deed to your new property, how does one protect title? A purchaser should purchase a title insurance policy, and in fact, it will be required if a mortgage loan is being taken out to purchase the property. Prior to the issuance of the policy, a title search of the public records will be completed to ensure that the grantor is the record owner, there are no liens, prior years’ taxes have been paid, there are no outstanding claims or mortgages, there are no claims by an heir of a prior owner, and no other defects of title exist. If a challenge to ownership is raised, the underwriter will defend the title and pay for any losses.
The deed symbolizes the entire purpose of any real estate transaction, namely, the transfer of real property. The type of deed used and the information contained therein will depend on the parties involved, the nature of the real estate transaction, and the character and history of the property itself. In many cases, the real estate in question may be one of the owner’s most valuable assets; therefore, any deed relating such property should be drafted and reviewed by a competent real estate attorney. At MacLean and Ema, P.A., an extensive portion of our practice deals in residential and commercial real estate transactions. If you are interested in buying or selling real estate, we hope you allow us to be of assistance to you.