Special Warranty Deed

A Special Warranty Deed is a type of legal instrument used to transfer property ownership from one individual or entity to another. This type of deed provides a middle-ground level of protection for the grantee (the buyer) by ensuring that the grantor (the seller) holds a clear title to the property being sold, but only warrants against defects that occurred during their period of ownership. In other words, the grantor guarantees that no legal issues arose with the title of the property while they owned it but doesn’t cover any problems that might have existed before their ownership.

Understanding Special Warranty Deeds

Special warranty deeds are commonly used in commercial real estate transactions but can also be employed in residential contexts. The main difference between a general warranty deed and a special warranty deed lies in the scope of protection. While a general warranty deed covers the entire history of the property, a special warranty deed limits its cover to the period during which the grantor owned the property.

Key Components of a Special Warranty Deed

Grantor and Grantee Information: Names and addresses of the seller (grantor) and buyer (grantee).
Property Description: A legal description of the property being conveyed, including address, lot, and block details.
Conveyance Language: Phrasing that specifies the transfer of property ownership.
Warranty Language: Declarations from the grantor assuring that the property was not encumbered during their ownership except as noted.
Execution by Grantor and Acknowledgment: The grantor must sign the deed in the presence of a notary public or other authorized official.

Warranties and Guarantees

Warrants Against Grantor’s Acts: Assures that the grantor has not taken any actions during their period of ownership that would negatively impact the grantee’s title.
Protection Against Encumbrances: Guarantees that there are no encumbrances, such as liens or easements, placed by the grantor that have not been disclosed.

Situations for Using Special Warranty Deeds

Commercial Real Estate Purchases: Companies often use special warranty deeds as they provide sufficient protection and are often acceptable given the complex nature of commercial property transactions.
Beneficiary Deeds: Transfers made after the death of the property owner, specifying heirs without requiring probate.
Foreclosure Property Sales: Lenders may use special warranty deeds to transfer foreclosed properties as they want to limit their liability to the period of foreclosure.

Limitations and Risks

The primary limitation of a special warranty deed is that it does not protect the buyer from title issues that existed before the grantor’s period of ownership. Therefore, if there were any encumbrances, liens, or other title defects before the grantor acquired the property, the buyer is not protected against these.

Comparison with Other Deeds

General Warranty Deed: Offers the highest level of protection, covering the entire history of the property.
Quitclaim Deed: Provides no warranties; transfers any interest the grantor may have in the property without guarantees.
Bargain and Sale Deed: Similar to special warranty deeds but typically used in tax sales and does not always provide specific warranties against the grantor’s actions.

How to Create a Special Warranty Deed

Creating a special warranty deed involves several steps, usually requiring legal expertise to ensure that the document adheres to state-specific requirements:

Prepare the Document: Include all necessary details, such as grantor/grantee information, property description, and warranty language.
Review by Legal Counsel: Have the deed reviewed by an attorney to ensure compliance with local laws and regulations.
Execution: The grantor signs the deed in front of a notary public.
Recording: Submit the deed to the local county recorder’s office to be officially recorded.

Importance in Real Estate Transactions

Special warranty deeds strike a balance by providing limited protection while transferring property interests. They allocate responsibilities between the buyer and seller, making them a viable option for various transaction types.

Here’s why they’re important:

Risk Management: Help manage and limit the liability of sellers while offering buyers assurance for the period of the grantor’s ownership.
Cost Efficiency: Often involve lower costs compared to general warranty deeds due to the reduced scope of liability.
Flexibility: Used in different contexts, including trusts, estates, and commercial transactions.

Conclusion

Special warranty deeds are crucial in the realm of property transfer, providing protection specific to the grantor’s period of ownership. Understanding their structure, implications, and appropriate usage scenarios can aid buyers and sellers in making informed decisions in real estate transactions.