To Read Articles from Doug and our other Experts please consider subscribing to the RSS feed below:
Deeds in Texas - How do they differ and what do they mean?
1. General Warranty Deed - this conveys property with a full warranty of the seller's chain of title for anything that might have happened at any time.
2. Special Warranty Deed- this conveys property with a warranty limited to the time during which the seller owned the property.
3. Deed Without Warranty - the seller conveys title but disclaims all warranties - this is the Texas equivalent of what is most commonly referred to in other states as a "Quitclaim Deed". In Texas, title companies will generally refuse to insure title based solely upon a Quitclaim Deed, but they generally will insure on a Deed Without Warranty.
4. Quitclaim Deed - in Texas, this is merely a promise by the "grantor" that it will never pursue title against the "grantee" - but it does not actually convey title and does not have any "granting" words in it. As noted above, because a quitclaim in Texas is not a conveyance, title companies will normally refuse to insure title based solely upon a quitclaim deed.
FREQUENTLY ASKED QUESTIONS:
Q. What is the difference in language between a General Warranty Deed and a Quitclaim Deed?
A. The two deeds are identical, except that a Special Warranty Deed has the italicized language added at the end of the "granting clause" of the Deed, as shown below:
"Grantor, for the consideration and subject to the reservations from and exceptions to conveyance and warranty, GRANTS, SELLS, and CONVEYS to Grantee the Property, together with all and singular the rights and appurtenances thereto in any wise belonging, to have and hold it to Grantee, Grantee's successors, or assigns forever. Grantor hereby binds Grantor and Grantor's heirs, executors, administrators, and successors to WARRANT and FOREVER DEFEND all and singular the Property to Grantee and Grantee's successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, except as to the reservations from and exceptions to conveyance and warranty, when the claim is by, through or under Grantor, but not otherwise."
Q. What is the practical result of adding the "special" language?
A. Where a General Warranty Deed is given, and there is a failure of title, the buyer will have a claim not only against the seller for any claims which arise by and through the seller, but also for claims which arise in the chain of title into the seller. If the warranty is limited to a special warranty, the seller is only responsible for claims arising during the term of the seller's ownership, such as judgments, tax liens, easements or conveyances made by the seller, to which items the seller fails to take exception in the seller's deed. In other words, a special warranty deed limits the buyer to a claim against the title policy for any matters that did not arise by and through the seller.
As such, if the seller insists upon giving a Special Warranty Deed, the buyer has every right to insist upon selecting the title company that will close and insure title pursuant to the earnest money contract. The buyer will have every incentive to make certain that the title insurance company is careful in conducting its title search, and is stable enough to still be in business when and if a title claim arises.
Q. If I give a General Warranty Deed, and the title company has to pay a claim, can the title company sue me?
A. Yes, the title company paying a claim will be subrogated to the rights of its customer and will be able to pursue the seller to recover amounts paid, even if the seller was not the source of the claim, but rather, someone in the prior chain. Also, a seller giving a general warranty deed can be liable for claims in excess of the available insurance coverage. As such, if the seller is sued, the seller should notify the title insurer who insured the property when the seller purchased it. The seller may have warrantor's coverage under his policy, and this may bring an additional title insurer into the settlement process.
Moral of the Story-If you are the seller, insist that you are only willing to provide a Special Warranty Deed. Likewise, if you are the buyer and the seller so insists, you should be able to pick who will be issuing the title policy. The seller may be "paying" for the policy (with the buyer's funds), but the buyer will be the one having to pursue the claim with the title company.
Douglas W. Becker
Commercial Escrow Manager and Underwriting Counsel
Chicago Title Insurance Co.
270 N. Loop 1604 E., Suite 115
San Antonio, Tx. 78232
Commercial Real Estate Law
Residential Real Estate Law