Special Warranty Deed: Limited Title Warranty

August 25, 2024 3 min read Real Estate Law Property Deeds Real Estate Transactions Title Warranty Special Warranty Deed Real Estate Law

A Special Warranty Deed provides a warranty of title limited to claims arising by, through, or under the grantor, excluding defects existing before the grantor's ownership.

On this page

A Special Warranty Deed is a type of property deed in which the grantor (seller) provides a limited warranty of title to the grantee (buyer). This warranty is confined to claims or encumbrances that arise from the period during which the grantor held title to the property. It explicitly does not cover any title defects or claims that originated prior to the grantor’s ownership.

Key Features of Special Warranty Deed

Limited Title Warranty

The grantor ensures that the title is clear of defects and encumbrances only for the time they held ownership. This means if any title issues originated before the grantor acquired the property, the grantor is not liable for those problems.

Who Uses Special Warranty Deeds?

Special Warranty Deeds are typically used in commercial real estate transactions or auctions, and less frequently in residential property sales.

Comparison with Warranty Deed

A Warranty Deed, in contrast, offers a broad warranty that covers the entire history of the property. The grantor promises that there are no title defects, regardless of when they occurred.

Legal Language and Terms

Grantor

The person or entity selling or transferring the property.

Grantee

The person or entity receiving the property.

Title Defects

Issues that may challenge the grantee’s rightful ownership, such as liens, unpaid taxes, or contested ownership.

Encumbrances

Claims or liabilities attached to the property, like mortgages, easements, or restrictions.

Historical Context

The use of Special Warranty Deeds grew more common in the United States as property laws evolved, particularly for commercial real estate transactions. This limited warranty provided a balanced risk-sharing approach between buyers and sellers.

Applicability

Examples

Commercial Real Estate: A company selling an office building might use a Special Warranty Deed, ensuring the buyer that any potential title issues before the company’s ownership are not their responsibility.
Auction Sales: Properties sold at auctions often come with Special Warranty Deeds, reflecting the potential unknowns about prior ownerships.

Warranty Deed: A deed that guarantees the property has clear title across its entire history.
Quitclaim Deed: A deed that provides no warranties of title, simply transferring whatever interest the grantor may have.
Title Insurance: An insurance policy that protects holders from title defects and encumbrances.

FAQs

Q: What are the risks of using a Special Warranty Deed?

A: The primary risk is the limitation of the warranty, which does not cover title defects arising before the grantor’s ownership.

Q: Why would someone accept a Special Warranty Deed?

A: Buyers may accept it in commercial transactions where they conduct extensive due diligence or when purchasing properties at a reduced price, as in auctions.

Q: Can a Special Warranty Deed be used in residential transactions?

A: Yes, but it is less common compared to a General Warranty Deed, which offers more comprehensive protection.

References

American Bar Association. “Property Deeds and Titles.”
Legal Information Institute, Cornell Law School. “Deeds.”
National Association of Realtors. “Guide to Real Estate Transactions.”

Summary

A Special Warranty Deed provides a limited warranty to the grantee, ensuring the title is clear of defects only during the grantor’s ownership period. This deed type is predominantly used in commercial transactions and auctions, offering a balanced approach to title risk between buyers and sellers.

By understanding the specifics of Special Warranty Deeds, both grantors and grantees can better navigate real estate transactions, ensuring their rights and obligations are clearly defined.