Winter Park Home, Volume 6 / Issue 3, 2008Clients often ask me to prepare a deed outside of a purchase and sale transaction, which typically consists of a transfer from one or two individuals to another individual or legal entity. The context varies from that of a gift, to that of a transfer by a shareholder to his privately owned corporation. The client often requests that the deed be in the format of a quitclaim deed, even though, as explained below, a warranty deed may be more appropriate. This article points out some of the differences and benefits of these two types of deeds, while detailing the parameters of the Special Warranty Deed that is also used in conveying real estate in Florida.
The three primary forms of deeds used in Florida are the Warranty Deed, the Special Warranty Deed, and the Quitclaim Deed. The Warranty Deed and Special Warranty Deed provide substantive covenants of ownership, while the Quitclaim Deed provides no covenants of ownership, and only conveys the interests that the Grantor (the person conveying the property) has in the property. The Grantee (the person to whom the property is being deeded) of a Quitclaim Deed will generally have no recourse against the Grantor, when confronted with any challenges as to the ownership of the property.
A Warranty Deed includes six covenants, or warranties, by which the Grantor is bound. The first three covenants are known as “present covenants,” and the second three are referred to as “future covenants.”
Present Covenants consist of “seisin” (warranty that the Grantor is the legal owner of the property and has the right to possess the property), covenant of the owner’s right to convey, and the covenant against encumbrances (i.e. that there are no liens or encumbrances that attach to the property). The present covenants can only be enforced by the immediate Grantee. For example, if Andrew conveys land to Bruce by Warranty Deed, and Bruce subsequently conveys the same land to Charlie by Warranty Deed, then Charlie can sue Bruce under these present warranties, but Charlie cannot directly sue Andrew.
Future Covenants consist of quiet enjoyment (a promise that the Grantee’s possession will not be disturbed due to a prior existing title defect), warranty (promise by the Grantor to protect the Grantee from any loss caused by the pre-existing title defect), and further assurances (agreement by Grantor to execute additional documents if needed). In many respects, the three future covenants are more important, since they represent a continuing obligation of the Grantor to take curative action if subsequent grantees or purchasers are confronted by defects in the chain if title that existed at the time the Grantor conveyed the property to the Grantee. In the example noted in the preceding paragraph, Charlie can sue Andrew for any violation of the future covenants.
A Special Warranty Deed differs from the general Warranty Deed because it only covenants against defects in title that are specifically caused by the Grantor. It does not warrant against any problems that predate the time the Grantor acquired title to the property. This deed is frequently used by those acting in a fiduciary capacity (e.g. Personal Representatives, Guardians, and Bankruptcy Trustees), and by Lenders who are in title after a mortgage foreclosure action.
A Quitclaim Deed does not include any assurances of ownership–it only provides that that if the Grantor owns the property, then the Grantor is transferring his ownership interest in the property to the Grantee. Since the Grantee has no recourse against the granting party, these deeds are potential red flags that the Grantor may not own the property. Since Quitclaim Deeds do not provide a warranty of ownership, they are useful in title clearing actions, where an owner years back in the chain of title is hesitant to provide any warranty coverage; in divorces, where the court specifically directs that a Quitclaim Deed be provided by one spouse to the other; and, in situations where the Grantor is unclear as to his/her ownership of the property. In this light, a title insurance policy obtained by a purchaser provides a comfort level that any prior quitclaim deeds in the chain of title will not adversely impact the ownership of the purchaser.
Why, therefore, do I recommend the use of a Warranty Deed instead of a Quitclaim Deed, in situations where there is no consideration being paid? Think of the identity of the Grantee. If the Grantor’s goal is to protect the interests of the Grantee, then a Warranty Deed should be used. Here is an example. Fred Thomas, a single man, is the sole owner of property and has an owners’ policy of title insurance. Fred decides that he wants to convey an interest in the property to his daughter Mary, so he directs that Mary’s name be added to the title, to create a joint tenancy with right of survivorship.
A couple of years later, Fred dies. Mary becomes the sole owner of the property. She is subsequently notified that a missing heir back in the chain of title failed to convey his proportional interest in the property.
If Fred conveyed the property to Mary by Quitclaim Deed, Mary would have no recourse either against Fred’s title insurance policy or against Fred’s estate and his predecessors in interest (i.e. Mary has no one to sue for coverage). If Fred used a Warranty Deed, Mary will be able to take steps to cure the title, either under Fred’s title insurance policy or through Fred’s warranties of title.
For the reasons stated above, I generally recommend the use of a Warranty Deed in these transfers. An individual should always consult an attorney before executing any deed that transfers an interest in real property to another individual or entity–not only to determine the appropriate format of the deed, but to also determine if there are any other consequences that will result from the execution and recording of that deed.
Visit our website for more information on this subject.
Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.
The three primary forms of deeds used in Florida are the Warranty Deed, the Special Warranty Deed, and the Quitclaim Deed. The Warranty Deed and Special Warranty Deed provide substantive covenants of ownership, while the Quitclaim Deed provides no covenants of ownership, and only conveys the interests that the Grantor (the person conveying the property) has in the property. The Grantee (the person to whom the property is being deeded) of a Quitclaim Deed will generally have no recourse against the Grantor, when confronted with any challenges as to the ownership of the property.
A Warranty Deed includes six covenants, or warranties, by which the Grantor is bound. The first three covenants are known as “present covenants,” and the second three are referred to as “future covenants.”
Present Covenants consist of “seisin” (warranty that the Grantor is the legal owner of the property and has the right to possess the property), covenant of the owner’s right to convey, and the covenant against encumbrances (i.e. that there are no liens or encumbrances that attach to the property). The present covenants can only be enforced by the immediate Grantee. For example, if Andrew conveys land to Bruce by Warranty Deed, and Bruce subsequently conveys the same land to Charlie by Warranty Deed, then Charlie can sue Bruce under these present warranties, but Charlie cannot directly sue Andrew.
Future Covenants consist of quiet enjoyment (a promise that the Grantee’s possession will not be disturbed due to a prior existing title defect), warranty (promise by the Grantor to protect the Grantee from any loss caused by the pre-existing title defect), and further assurances (agreement by Grantor to execute additional documents if needed). In many respects, the three future covenants are more important, since they represent a continuing obligation of the Grantor to take curative action if subsequent grantees or purchasers are confronted by defects in the chain if title that existed at the time the Grantor conveyed the property to the Grantee. In the example noted in the preceding paragraph, Charlie can sue Andrew for any violation of the future covenants.
A Special Warranty Deed differs from the general Warranty Deed because it only covenants against defects in title that are specifically caused by the Grantor. It does not warrant against any problems that predate the time the Grantor acquired title to the property. This deed is frequently used by those acting in a fiduciary capacity (e.g. Personal Representatives, Guardians, and Bankruptcy Trustees), and by Lenders who are in title after a mortgage foreclosure action.
A Quitclaim Deed does not include any assurances of ownership–it only provides that that if the Grantor owns the property, then the Grantor is transferring his ownership interest in the property to the Grantee. Since the Grantee has no recourse against the granting party, these deeds are potential red flags that the Grantor may not own the property. Since Quitclaim Deeds do not provide a warranty of ownership, they are useful in title clearing actions, where an owner years back in the chain of title is hesitant to provide any warranty coverage; in divorces, where the court specifically directs that a Quitclaim Deed be provided by one spouse to the other; and, in situations where the Grantor is unclear as to his/her ownership of the property. In this light, a title insurance policy obtained by a purchaser provides a comfort level that any prior quitclaim deeds in the chain of title will not adversely impact the ownership of the purchaser.
Why, therefore, do I recommend the use of a Warranty Deed instead of a Quitclaim Deed, in situations where there is no consideration being paid? Think of the identity of the Grantee. If the Grantor’s goal is to protect the interests of the Grantee, then a Warranty Deed should be used. Here is an example. Fred Thomas, a single man, is the sole owner of property and has an owners’ policy of title insurance. Fred decides that he wants to convey an interest in the property to his daughter Mary, so he directs that Mary’s name be added to the title, to create a joint tenancy with right of survivorship.
A couple of years later, Fred dies. Mary becomes the sole owner of the property. She is subsequently notified that a missing heir back in the chain of title failed to convey his proportional interest in the property.
If Fred conveyed the property to Mary by Quitclaim Deed, Mary would have no recourse either against Fred’s title insurance policy or against Fred’s estate and his predecessors in interest (i.e. Mary has no one to sue for coverage). If Fred used a Warranty Deed, Mary will be able to take steps to cure the title, either under Fred’s title insurance policy or through Fred’s warranties of title.
For the reasons stated above, I generally recommend the use of a Warranty Deed in these transfers. An individual should always consult an attorney before executing any deed that transfers an interest in real property to another individual or entity–not only to determine the appropriate format of the deed, but to also determine if there are any other consequences that will result from the execution and recording of that deed.
Visit our website for more information on this subject.
Frank Pohl founded Pohl & Short, P.A. based upon the belief that a high quality small commercial law firm was needed in the Orlando, Florida area as an alternative to the large commercial law firms. He still believes that client responsiveness and satisfaction has a place in a fast changing legal profession. Frank has been involved in the Central Florida community for more than twenty-five years. He has been a dedicated past board member of many local organizations over the years. Frank graduated magna cum laude with a B.G.S. Degree from the University of Miami in Coral Gables, Florida; attended the University College at the University of London as an undergraduate studying British literature and British history; obtained his Juris Doctorate Degree in 1979; and obtained a Masters of Law and Letters Degree (LL.M.) from New York University School of Law in 1980. Frank is a member of The Florida Bar, the California Bar, and the District of Columbia Court of Appeals. He is also admitted to the U.S. Supreme Court. He has served on the Orange County Bar Association Real Estate Committee and is a member of the The Florida Bar’s Real Property and Corporation and Business Law Section. He has also served on the Florida Bar Grievance Committee.
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