Do The Right DeedAdded by Hawley Troxell in Articles & Publications, Business Law on April 29, 2015
Early in my career, I represented a client that owned property subject to a deed restriction purporting to restrict the use of the home as the president’s residence. The home had become prohibitively expensive to maintain, so the client sought to sell the property free of the restriction. The assignment was fascinating, for what on the surface seemed to be a straightforward deed restriction transformed into an analysis of deed interpretation dating back to the earliest records of law. From that assignment, I developed a true appreciation of deeds and how truly complex they can be, for deeds, the law interpreting deeds, and disputes over deeds are nearly as old as the land itself.
A discussion on deeds can go on and on, but for this post, I’m going to talk about three different types, the warranty deed, the grant deed and the quit claim deed, and explain a few of their nuances and common uses. The take-away, should you choose to stop reading now, is don’t overlook the deed. Deeds represent the pinnacle of most transactions and deserve higher attention than they usually receive.
Let’s start with the grant deed. Often called a special or limited warranty deed, the grant deed is a creature of Idaho law. When the word “grant” is used in a deed, Idaho Code Section 55-612 implies certain statutory warranties of title. The warranties are that the grantor (the seller) has not conveyed the land, or any right, title or interest in the land to anyone other than the grantee (the buyer), and that the land is free from encumbrances done, made or suffered by the grantor. These statutory warranties are quite broad and can be problematic if not carefully considered. In a special or limited warranty deed, the statutory warranties of title are often modified to fit the situation and typically a grant deed needs to be modified too. The modifications need to be carefully considered, for, like any deed restriction, the language of the modification will be interpreted according to case law dating back centuries. Most typically, the statutory warranties should be modified to be subject to all matters of record as of the date of the deed.
The warranty deed is a more robust form of grant deed. The warranty deed almost always uses the word grant, thus we know it automatically makes the statutory warranties of title, and then builds from there. Where the grant deed makes the warranties of title based on the grantor’s acts, the warranty deed usually expands the warranties to the acts of the grantor and against all and every person that may make a claim on title. This means if a prior owner created a previously unknown title problem, the grantor will be liable for the cure. When representing a seller client, I’ll often advise against using a warranty deed, especially when the seller is purchasing a title insurance policy for the buyer at closing. The seller should be responsible for its own acts (we all should take responsibility for our actions but that’s a tangent for another posting), but the seller should not be liable for the acts of others that the grantor neither caused nor knew about–that is what title insurance is for. Title insurance covers claims arising from prior defects in title and the seller should not be required to underwrite those claims when it purchases the very insurance meant to cover the claim. Finally, like the grant deed, the statutory warranties of title are often modified and need to be read with care. From my experience, every title company’s form warranty deed is a little different but even little differences can have big consequences.
Finally, there is the quit claim deed. The quit claim deed does not use the word “grant”. The quit claim deed often uses the phrase, “releases, bargains, sells, conveys and quit claims.” But, whatever the phrase used, if the deed does not use the “grant”, then, unless otherwise stated in the deed itself, a quit claim deed makes no warranties of title, not even that the grantor actually even owns the land that is being conveyed. For this reason alone, use of a quit claim deed should be taken with caution. Nonetheless, quit claim deeds or some form of quit claim deed are commonly used.
Whatever the name of the deed is, warranty, grant or quit claim deed, the key is to look for the word grant, then look for how the statutory warranties of title implied from the word grant are modified. Without the word grant in the deed, the deed is essentially a quit claim deed with possibly some warranties of title as specifically set forth in the deed. The key is always to read the deed carefully. So often parties are simply so relieved to get to closing that the deed is overlooked, but the advice of the boxing referee is just as applicable here, protect yourself at all times–don’t overlook the deed form.
For more information or questions, please contact a member of our Real Estate group or call 208.344.6000.
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