Special Warranty Deed: The grantor in a special warranty deed—the party who’s selling or transferring the property—conveys it with just two warranties. She guarantees that she has received title, and she warrants that the property wasn’t encumbered during her period of ownership.
The grantor effectively only warrants the title of the property against her own actions or omissions. She didn’t personally take any action or fail to take any action that would affect title, and no one else did either—at least during her period of ownership. She warrants against nothing that might have occurred or existed prior to her acquiring the property.
What Is a Special Warranty Deed?
A special warranty deed is a deed to real estate where the seller of the property—known as the grantor—warrants only against anything that occurred during their physical ownership. In other words, the grantor doesn’t guarantee against any defects in clear title that existed before they took possession of the property.
Special warranty deeds are most commonly used with commercial property transactions. Single-family and other residential property transactions will usually use a general warranty deed. Many mortgage lenders insist upon them the use of the general warranty deed. Special warranty deeds go by many names in different states including covenant deed, grant deed, and limited warranty deed.
Special Warranty Deed Texas
A special warranty deed can be used in Texas to convey title to real property. Special warranty deeds in this state will contain both express and implied warranties. A special warranty deed in Texas only warrants against defects, liens, and encumbrances arising by, through, or under the grantor. Even if a conveyance does not have express covenants of warranty, the words “grant” and “convey” will imply only the following covenants from the grantor: (a) That prior to the execution of the conveyance, the grantor has not conveyed the estate or any interest in the estate to any person other than the grantee and (b) that at the time of execution of the conveyance, the estate is free from any encumbrances (5.023).
A real property instrument, such as a special warranty deed can be recorded if it has been acknowledged, sworn to with a proper jurat, or proved according to the law (12.001). Original signatures are required. The failure of a notary public to attach an official seal to an acknowledgment or other proof taken in a state other than Texas will render the acknowledgment invalid only if the jurisdiction in which the acknowledgment is taken requires the notary public to attach a seal (12.001d).To be effectively recorded, an instrument relating to real property must be eligible for recording and must be recorded in the county where the property, or a part of the property, is located (11.001).
Recording an instrument is necessary to provide constructive notice. When a special warranty deed has been properly recorded in the county where the property is located, the instrument is deemed to impart constructive notice of the contents to all persons. Additionally, the instrument will be part of the public records and is open to inspection (Sec. 13.002). A special warranty deed will be void as to a creditor or subsequent purchaser for a valuable consideration without notice unless the deed has been acknowledged, sworn to, or proved and filed for the record (Sec. 13.001). Unrecorded special warranty deeds are binding on the parties to the instrument, on the parties’ heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument (Sec. 13.001c).
Special Warranty Deed Florida
In Florida, a special warranty deed is a real estate transaction in which the transfer of a property is involved. It is often more limiting than other kinds of real estate deeds because the special warranty deed allows the seller or the grantor to turn over the deed of a property in any condition that he or she received it. The seller must provide a warranty that no damage or defect occurred while he or she owned it, but does not need to make any guarantees against what might have occurred to the property before he or she came to own it.
A special warranty deed in Florida is often used by a lender when they acquire a new property through foreclosure. When the lender then sells or grants the property to developers or new buyers, the lender is required to ensure there are no defects to the property during the lender’s ownership. However, the lender is not held accountable for any problems to the property that occurred before the foreclosure gave the lender title.
Essentially, the lender or seller of the property is saying that he or she is granting the property to a new owner in exactly the same condition that it was received. Talk to a real estate attorney or foreclosure expert before entering into a special warranty deed in Florida. You want to make sure all your claims to the property are protected, especially when you are dealing with a foreclosed property. Stephen K. Hachey, a Florida real estate attorney, can help you navigate this process. Contact our offices at 813-324-2905.
Difference Between A General Warranty Deed And A Special Warranty
Both types of Warranty Deeds (Special and General) guarantee the buyer:
- That the seller owns the title
- That the seller is legally allowed to sell the property
- That the property has not already been sold
- That the property is free of debt or other claims (aside any mentioned in the deed)
- That the seller is responsible for any problems/faults with the property
However, where the guarantees in a Warranty Deed cover the property’s entire history, the Special Warranty Deed only covers the period of time for which the seller owned it. While the seller in a Warranty Deed must defend the title against all other claims and compensate the buyer for any unsettled debts or damages, the seller in a Special Warranty Deed is only responsible for debts and problems accrued or caused during his ownership of the property.
Warranty Deeds vs. Nonwarranty Deeds
Some deeds offer no warranties at all, so a special warranty deed is at least one step above this type of deed, as far as protections are concerned. A non warranty deed sometimes referred to as a Quitclaim Deed, simply states that the grantor is giving his interest in a property to the grantee.
There’s actually a gray area between a non warranty deed and a quitclaim deed, however. A quitclaim deed doesn’t make any promises that the grantor actually has the interest to give. A non warranty deed does guarantee that the grantor has something to convey, but it offers nothing more than that. Neither type of deed warrants that the current owner or anyone else has done anything to impede title.
When Is a Special Warranty Deed Used?
Special warranty deeds are rarely used in residential property transactions between strangers for obvious reasons.
In the case of estate matters, however, the individual receiving the property generally has some comfort level and knowledge of the property’s history, so these deeds are used more often in these situations. And properties are commonly transferred by the executor of an estate or the trustee of a living trust in these situations—neither of whom should be held liable for faults in the title because they never personally owned the property.
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Sometimes the grantor can’t make extensive warranties. A mortgage lender might not know the prior history of the house in cases where it’s foreclosed on the property and is now offering it for resale. This can be a tricky situation because the very fact that the previous owners went into foreclosure indicates they were probably having some financial difficulties. They might have encumbered title, but they’re not the individuals who are making a guarantee that they did not. The grantor in this situation would be the foreclosing lender.
As for commercial real estate transactions, these paths to ownership can be muddied by multiple owners, foreclosures, and other issues. These properties might have convoluted and extensive ownership chains, so it’s more likely that special warranty deeds will be used in these situations.
Example of the Pitfalls of a Special Warranty Deed
Let’s say you’ve just found the property of your dreams and it’s yours for a very reasonable price, but the seller wants to convey it to you by special warranty deed.
The previous owner—the one who held ownership prior to the current seller acquiring the property—failed to pay his property taxes for several years. The county has perfected a lien against the property for taxes due. The seller does not have to disclose this to you in a special warranty deed because he didn’t incur the property taxes during his ownership period.
Payment of those taxes can, therefore, become your responsibility when you sign the deed. You’re effectively taking the property as-is. The only way to remove the lien is to pay the underlying debt.