A special warranty deed is one of the most common deed forms due to its flexibility for certain common situations. Essentially, the special warranty deed is a variation on the traditional warranty deed, but with a twist.
In addition to the normal deed elements, the special warranty deed comes with a specific warranty that sets it apart from other deeds, including general warranty deeds.
In a general warranty deed, the grantor is guaranteeing that there are no problems with the title being conveyed. This general warranty obligates the grantor to defend the grantee in the event that someone makes a claim against the title.
In a special warranty deed, the grantor makes a similar guarantee, but with an important limitation. Rather than warranting that there are no problems with the title, the grantor warrants that the grantor has caused no problems with the title. Put another way, the grantor has not done anything to encumber the title while the grantor has owned the property.
This warranty is not a guarantee that nothing has happened before the grantor received ownership of the property. The grantor, therefore, is obligated to defend against any claims arising out of the grantor’s ownership, but not obligated to defend claims regarding issues from before the grantor’s ownership.
This is important because it means that the seller can still provide some protections for the buyer while also mitigating the risk to the seller. The buyer can feel confident that nothing has happened recently that might cause problems, while still understanding that a title clearing process and title insurance will be important to the overall transaction.
Special warranty deeds are very useful for professional buyers and sellers. In particular, if an investor buys a property and only owns the property for a short period of time before reselling, using a special warranty deed allows the seller to make a limited warranty covering that time without exposing the seller to the risk of acts by prior owners.
For example, an investor looking to update a property and then resell it can warrant to the buyer that there are no construction liens or other problems arising from the updating process without taking the risk that there were already title issues previously.
If you are buying and selling properties quickly, special warranty deeds can be very helpful. Knowing how they work and what your rights and obligations under those deeds are can help you strategize as to whether this or another deed form is right for you.
The information provided in Peak Title Professionals, does not, and is not intended to, constitute legal advice. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.
