When you purchase a home, ownership of that property transfers to you through what is legally called a deed. This is a piece of paper that is legally binding and says you are the owner. The same type of legally binding document applies to commercial real estate transactions, as well. However, there are many types of deeds, and they each offer different levels of protection against claims that can come from third parties after you take ownership. It is important to understand the difference between these types of deeds so that you know what level of protection you have when you invest in a new property.
Special warranty deed definition
One such type of deed is called the special warranty deed, which, as the name suggests, provides a special level of warranty or protection against third-party claims once you take ownership of a property.
What is a special warranty deed?
A special warranty deed transfers ownership or a title to a piece of property, but it comes with certain guarantees from the person selling that property. These guarantees include things like:
- The new owner has no outstanding ownership claims;
- There are no outstanding liens or mortgages against the property;
- There are no issues entities or individuals have made against the property.
A special warranty deed means that the person who is transferring the property to you or selling it guarantees that since the time they took possession of the property, or they received the title, the property had no claims against it and they did nothing to it that could be detrimental and leave you open to third-party claims later. They effectively say that since the time they took control they didn’t personally act or fail to act in a way that would negatively affect the title to the property. They also provide a guarantee that during the time they were in charge of the property, no one else did anything that would negatively affect the title.
What Must Be Included in a Special Warranty Deed
When making or reviewing a special warranty deed, there must be specific legal information.
- You must have the name and address of the person selling the property. This is legally referred to as conveying the property, and the seller is referred to as the grantor.
- You need the name and address of the person who is buying the property. This is legally referred to as receiving the property, and they are called the grantee.
- There must be a legal description of the property, which is usually found on any previous deed statements.
- You must include language that states:
- The grantor is the legal owner and has a legal right to convey the property;
- There are no outstanding claims from creditors against the property instituted during the time the grantor owned the property;
- The grantor has clear title but if problems existed prior to that time frame, the grantee is not entitled to compensation.
Let’s look at an example:
John Martinez hereafter referred to as the grantor resides at 123 Maple Street, Small Town, State. The grantor has owned property lot number 425 since June 14, 2021, and transfers it to Tina May, hereafter referred to as the grantee. The grantee lives at 124 Acorn Street, Small Town, State. The grantor conveys property lot number 425 with a special warranty deed, promising that from June 14, 2021, until the date of sale there are no claims against this title. The grantor makes no promises about the time before this date. The grantee accepts this property knowing that if there are claims against the title prior to this date, the grantor is not responsible and the grantee cannot seek damages.
When Is a Special Warranty Deed Used?
Given the uniqueness of the special warranty deeds, they are not commonly found in residential real estate, so if you are just buying a house one town over, it is unlikely you will face this. The general warranty deed is often what you use for buying a home with a mortgage.
However, special warranty deeds are still common in real estate, but more often in estate matters. When someone passes away, their property moves into an estate, which the executor oversees. That executor can’t be legally responsible for any faults or defects in the title or property because they were never an owner, nor did they live there. So, the special warranty deed is a way for them to effectively say, “While I was in charge, nothing bad happened.”
Other situations include times when the grantor or seller can’t offer extensive warranties or protections. If, for example, a bank forecloses on a home, the bank doesn’t necessarily know the property’s history or what was or was not done to it, so they can’t make any guarantees or warranties about the property when they sell it. So, they use a special warranty deed to protect themselves legally against faults or defects.
Commercial real estate sales might include this too, simply because a commercial property might have had lots of owners, issues, or foreclosures which the property owner needs to protect themselves from.
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Warranty Deeds vs. Non-warranty Deeds
There are other deeds which come with no warranties, no guarantees about the property, at all. These are classified as non-warranty deeds. When you evaluate the level of protection (warranty) you have when purchasing a property, non-warranty is at the bottom, with nothing. Then, there are quitclaim deeds. Quitclaim deeds make zero promises about the property, its condition, or what the current owner did or did not do to it. Moreover, with a quitclaim, there is no promise that the current owner has an interest in the property they are selling. There are also general warranty deeds which, as the name suggests, apply to general levels of protection.
How a Special Warranty Deed Differs from Other Deeds
In general, a special warranty deed differs from other deeds in two key ways:
- A special warranty offers some level of protection or warranty, and it applies to commercial real estate.
- The time frame is shorter compared to general warranties. General warranties might promise no defects in the property at any time since it was first owned, but the special warranty only extends this guarantee to the current ownership.
Conclusions: What is a Special Warranty Deed?
Now you know the special warranty deed definition as it applies to estate sales as well as a special warranty deed foreclosure. A residential property transaction that involves different types of deeds comes with different levels of protection and promises against property damage.