Limited warranty deed
Limited Warranty Deed is a sort of deed where the grantor guarantees that he has clear title to piece of real property and has a right to sell it to the buyer. There are several types of deeds but the limited warranty deed is the most favorable to the seller. This kind of deed guarantees that there are no title defects—claims against the title by a creditor or anyone else—that were put in place during the time period the grantor owned the property. The deed does not offer any guarantees about the condition of the title from the time period before the grantor took ownership. There are three main types of deeds used for property transfer:
- General warranty deeds the seller guarantees the buyer that he has the right to transfer the property. The Seller shall defend the title to the property against the claims of all persons. The seller is "seized of the fee" in the real estate."Seized of the fee" means that the seller warrants that he owns all of the rights in the real estate. There are no encumbrances against the real estate that are not listed in the deed.
- Limited warranty deeds the seller gives only two guarantees to the buyer. First : The seller personally has not done anything to the title that the seller received. It is a very limited warranty in comparison to the broad warranty in a general warranty deed where the seller warrants that the seller not only owns the property, but also all rights in the property. Second : The seller will defend the title to the property against the claims of persons making claims based on the prior actions of the seller, but no one else. This is a much more restrictive warranty than the broad warranty in the general warranty deed where the seller warrants that the seller will defend the title against the claims from all parties.
- Non-warranty deeds in this kind of agreement, the seller gives no warranties. Although lawyers quibble over whether there is a difference between a Non-Warranty Deed (which actually purports to convey something) and a Quitclaim Deed (which only releases any claims the grantor has in the land), they all share the same characteristic that they contain no warranty, even against the grantor's own acts. In a Non-Warranty or Quitclaim Deed, the seller merely is giving the buyer whatever rights, if any, that the seller has in the property and the seller makes no warranties of any nature about the seller's rights in the property.
What should limited warranty deeds contain?
Here are some example(R. Adams, 2016, p. 2):
- Name and address of the grantor,
- Legal description of the property,
- Statement that the grantor intends to convey the property to the grantee,
- Statement that the grantor is the legal owner of the property and has the legal right to transfer the property,
- Guarantee that there are no outstanding claims placed against the property by any creditor instituted during the grantor's ownership, with a promise of compensation by the grantor if that turns out not to be true.
Common uses of Special Warranty Deeds
Examples of use:
- Transferring real estate to a trust—like a living trust—that the transferor controls or benefits from,
- Transferring real estate to a business—like a limited liability company—that the transferor owns,
- Selling commercial or multi-family residential property,
- Transferring property to a new owner that is purchasing title insurance on the property and is not concerned with the limited warranty of title or in other circumstances where the current owner does not want to be legally responsible for problems with title that arose before the current owner owned the property.
Examples of Limited warranty deed
- A Limited Warranty Deed is typically used when a property is transferred from one individual to another. For example, if a homeowner is selling their property to an investor or a buyer, a Limited Warranty Deed would be used to ensure the buyer that the title of the property is free from liens, encumbrances, or other title defects that may have been placed on the property during the grantor’s ownership period.
- A Limited Warranty Deed can also be used in a situation where a grantor is transferring a property to a charitable organization. In this case, the grantor would be guaranteeing that the title is free from any title defects during their ownership.
- Another example of a Limited Warranty Deed would be when a grantor is transferring a property to a family member. In this instance, the grantor would be guaranteeing that the title is free from any title defects during their ownership.
Advantages of Limited warranty deed
A Limited Warranty Deed has several advantages, including:
- Protects the buyer: The Limited Warranty Deed offers the buyer a guarantee that the title is free and clear of any claims or defects that were created during the time the grantor owned the property. This offers the buyer a level of protection that other types of deeds do not provide.
- Provides peace of mind: As the deed guarantees that the title is free and clear of any claims or defects, it provides the buyer with peace of mind that they are buying a property with clear title.
- No hidden surprises: With the Limited Warranty Deed, the buyer knows that there will be no hidden surprises when it comes to the title of the property.
- Creates a stronger relationship between the parties: With the guarantee of the title, the buyer and seller have a stronger relationship as the buyer is more confident in the sale.
Limitations of Limited warranty deed
A limited warranty deed offers the most protection to the buyer, but does not guarantee that the title is free from defects from before the grantor's ownership. The following are the limitations of a limited warranty deed:
- Title defects from prior owner: A limited warranty deed does not guarantee that the title is free from defects from before the grantor's ownership.
- Unpaid Taxes: A limited warranty deed does not guarantee that all taxes have been paid. The buyer should check with the appropriate government office to ensure that all taxes have been paid.
- Unrecorded Liens: A limited warranty deed does not guarantee that all liens have been recorded or paid off. The buyer should check with the appropriate government office to ensure that all liens have been recorded or paid off.
- Zoning and other rules and regulations: A limited warranty deed does not guarantee that the property is in compliance with all zoning and other rules and regulations. The buyer should check with the appropriate government office to ensure that all zoning and other rules and regulations have been met.
- Environmental Concerns: A limited warranty deed does not guarantee that the property is free from environmental concerns. The buyer should consult with a qualified environmental specialist to ensure that there are no environmental concerns.
- Hidden Defects: A limited warranty deed does not guarantee that all hidden defects are disclosed. The buyer should consult with a qualified inspector to ensure that all hidden defects are disclosed.
- General Warranty Deed - this deed provides the most extensive guarantee of title from the grantor. It not only promises that the grantor has clear title to the property, but also guarantees that they have the right to transfer it without any issues from the time they took ownership up until the present.
- Special Warranty Deed - this type of deed is similar to the limited warranty deed, but it provides additional protections for the buyer. The grantor warrants that the property is free from any title defects created during the time they owned the property, but also promises that the title is free from any issues from the time preceding it.
- Quitclaim Deed - this is the least favorable type of deed to the buyer. The grantor is only warranting that they have the right to transfer the property and they make no promise that the title is free of defects or encumbrances.
In summary, Limited Warranty Deed is one of three main types of deeds used for property transfer, the other two being General Warranty Deed and Special Warranty Deed, and the least favorable type being Quitclaim Deed. Each type of deed provides different levels of protection and guarantees to the buyer so it is important to understand the differences before entering into a property transfer agreement.
|Limited warranty deed — recommended articles
|Special power of attorney — Clear title — Vesting order — Absolute assignment — Absolute title — Special warranty deed — Warranty of title — Equitable lien — Confession Of Judgment
- Adams R. (2016)., Understanding the General Warranty Deed Publication 2146, Texas A&M University,p.1-3.
- Foster L. (2011)., Deed Covenants of Title and the Preparation of Deeds: Theory, Law, and Practice in Arkansas, UARL Law Review, volume 34, University of Arkansas.
- Pierce D.E. (2010)., The art and science of drafting property conveyances, Washburn University School of Law.
Author: Zofia Rey