Understanding Property Deeds

Reviewed by Julius MansaFact checked by Yarilet Perez

Property deeds are legal documents used in real estate. They transfer ownership of real property from a grantor (seller) to a grantee (buyer). Real property is land or anything attached to the land, such as buildings or roads. For a deed to be legally operative, it must include the identification of the grantor and grantee and an adequate description of the property.

Deeds fall into a number of categories, including warranty, quitclaim, and special purpose.

Key Takeaways

• A property deed is a legal document that transfers the ownership of real estate from a seller to a buyer.
• For a deed to be legal it must state the name of the buyer and the seller, describe the property that is being transferred, and include the signature of the party that is transferring the property.
• In addition to being either official or private, deeds are classified as either general warranty, special warranty, or quitclaim.
• General warranty deeds give the grantee the most legal protection, while special warranty deeds give the grantee more limited protection.
• A quitclaim deed gives the grantee the least protection under the law.

What Are Property Deeds?

A property deed is a written and signed legal instrument that is used to transfer ownership of the real property from the old owner (the grantor) to the new owner (the grantee). Historically, real property was transferred through a ceremonial act known as “livery of seisin.” In this act, the person transferring the land handed a twig or clod of turf from the land to the person taking delivery of the land. A verbal or written statement often accompanied the gesture, though it was the livery of seisin that legally transferred the title to the property.

Today, the title to real property is conveyed by a paper deed.

Important

Deeds are either official, meaning they are executed as a result of a court or legal ruling, or more commonly, private, meaning they are executed by a deal struck between individuals or businesses.

Essential Deed Elements

While each state has its own requirements, most deeds must contain several essential elements to be legally valid.

• Written: Deeds must be in writing. While most deeds are completed on printed forms, there is no legal requirement that any specific form is used as long as the essential elements are included.
• Legal capacity: The grantor must have the legal capacity to transfer the property and the grantee must be capable of receiving the grant of the property. A person who is competent to make a valid contract is considered competent to be a grantor.
• Identification: The grantor and grantee must be identified in the deed in such a way as to be ascertainable. The property also must be adequately described and identified.
• Conveyance: Operative words of conveyance must be present. All standard form deeds include the necessary legal language that actually transfers the property.
• Signatures: The deed must be signed by the grantor or grantors if the property is owned by more than one person.
• Delivery: The deed must be legally delivered to the grantee or to someone acting on the grantee’s behalf.
• Acceptance: The deed must be accepted by the grantee. Typically, deeds are accepted by the grantee but in certain circumstances, the grantee could reject delivery of the deed.

Types of Deeds

Deeds can be classified in numerous ways. Broadly, deeds are classified as official or private. Official deeds are executed pursuant to a court or legal proceedings. Most property transactions, however, involve individuals and business entities using private deeds.

Deeds are also categorized based on the type of title warranties provided by the grantor.

General Warranty Deed

The general warranty deed offers the grantee the most protection. With this type of deed, the grantor makes a series of legally binding promises (called covenants) and warranties to the grantee (and their heirs) agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land.

The usual covenants for title included in a general warranty deed are:

• Covenant of Seisin: The grantor warrants they own the property and has the legal right to convey it.
• Covenant Against Encumbrances: The grantor warrants that the property is free of liens or encumbrances, except as specifically stated in the deed.
• Covenant of Quiet Enjoyment: The grantee will have quiet possession of the property and will not be disturbed because the grantor had a defective title.
• Covenant of Further Assurance: The grantor promises to deliver any document necessary to make the title good.

Special Warranty Deed

In a general warranty deed, the grantor promises to warrant and defend the title conveyed against the claims of all persons. In a special warranty deed, the grantor warrants that they received the title to the property and that they have not done anything while holding the title to create a defect.

In other words, only defects that arose during the grantor’s ownership of the property are warranted. Due to this limitation, the special warranty offers the grantee less protection than the general warranty deed. Many purchasers of real estate will insist on a general warranty deed to protect against problems that could arise as a result of a special warranty deed.

Quitclaim Deed

The quitclaim deed, also called a non-warranty deed, offers the grantee the least amount of protection. This type of deed conveys whatever interest the grantor currently has in the property—if any. No warranties or promises regarding the quality of the title are made.

If the grantor has a good title, the quitclaim deed is essentially as effective as a general warranty deed. However, if the title contains a defect, the grantee has no legal recourse against the grantor under the deed. A quitclaim deed is often used if the grantor is not sure of the status of the title (whether it contains any defects) or if the grantor wants no liability under the title covenants.

Special Purpose Deeds

Special purpose deeds are frequently used in connection with court proceedings and instances where the deed is from a person acting in some type of official capacity. Most special purpose deeds offer little to no protection to the grantee and are essentially quitclaim deeds.

Types of special purpose deeds include but are not limited to:

• Administrator’s Deed: This may be used when a person dies intestate (without a will). A court-appointed administrator will dispose of the decedent’s assets and an administrator’s deed may be used to convey the title of real property to the grantee.
• Executor’s Deed: This may be used when a person dies testate (with a will). The estate’s executor will dispose of the decedent’s assets and an executor’s deed may be used to convey the title or real property to the grantee.
• Sheriff’s Deed: This is given to the successful bidder at an execution sale held to satisfy a judgment that has been obtained against the owner of the property. The grantee receives whatever title the judgment debtor has.
• Tax Deed: This is issued when a property is sold for delinquent taxes.
• Deed in Lieu of Foreclosure: This is given by a borrower who is in default on a mortgage directly to the lender. This serves to prevent foreclosure proceedings, and if the lender accepts the deed in lieu of foreclosure, the loan is terminated. Many lenders prefer to foreclose in order to clean up the title.
• Deed of Gift (Gift Deed): This is used to convey the title on real property that is given for no consideration or for only a token consideration. In some states, the gift deed must be recorded within two years or it becomes void.

What Is Real Property?

Real property refers to land and anything immovable that is attached to that land. This can include things like a building, creek, or road. Real property is essentially the same as real estate.

What Is a Covenant in Real Estate?

A covenant is an agreement or promise between two parties that certain actions will or will not be carried out. In real estate deeds, covenants are generally used to promise that the seller has the right to sell the property and the buyer will have the right to own and use it as they wish. Property covenants are slightly different; they generally stipulate how a property may or may not be used. Homeowner’s associations (HOAs) often use property covenants.

What Is a Lien?

A lien is a legal right to an asset that is used to satisfy a debt or obligation. In real estate, a lien is the right to seize and sell a property if a contract is not met. A mortgage is an example of a lien that is put in place automatically; the mortgage lender has the right to seize the property if the owner is unable to make their mortgage payments. A lien on a property may prevent it from being sold, or it may pass to the buyer under certain types of deeds.

The Bottom Line

The transfer of a property’s title is made by a deed. Certain essential elements must be contained within the deed for it to be legally operative. Different deeds provide various levels of protection to the grantee and the obligations of a grantor are determined by the form of the deed.

Since deeds are important legal documents that affect ownership interests and rights, a qualified real estate attorney should be consulted in any transaction involving them, such as the closing of a home purchase.

Read the original article on Investopedia.