Purchasing property is a stepping stone that prompts a sense of accomplishment and promise for the future. It should be an exciting time, but it can also be stressful and confusing. When the long anticipated day for your closing finally arrives, an attorney will prepare and begin to explain a number of different documents. One of these documents will be the deed. Although all of the documents you will review and sign are important, without the deed, ownership will not be transferred from the seller to you, the buyer. The deed is generally not a long document, but what is included in your deed can make a huge difference if future problems arise.
After the deed is transferred to me I own the property, so does it really matter what kind of deed I have? Yes, the type of deed that is transferred can make a huge difference. This is because the type of deed will govern the liabilities of the seller if another person appears after the property is sold that has, or asserts, superior title to the property.
In North Carolina there are three different types of deeds that offer different types of protections, also known as warranties, to buyers on behalf of the seller. These three types of deeds are the: (1) general warranty deed, (2) special warranty deed, and (3) quitclaim deed.
A general warranty deed affords the most protections to the buyer, of the three types of deeds. It includes express promises from the seller to the buyer to assist with or defend the buyer if another seeks to interfere with or attack the buyer’s title. By executing a general warranty deed the seller essentially promises that the seller can, and is, conveying good title to the buyer, and that the seller will assist the buyer in defending attacks on the buyer’s title. The protections in a general warranty deed apply to issues that arose during both the seller’s possession and the possession of any owners before the seller. The covenants, also known as warranties, that are typically included in a general warranty deed are as follows:
1)Covenant of seisin, the promise that the seller is in the lawful possession of the property;
2)Covenant of the right to convey, the promise that the seller has the ability and right to transfer the title of the property to the buyer;
3)Covenant against encumbrances, the promise that title to the property is marketable, that there are no encumbrances on the property such as easements, mortgages, or leases that were not disclosed to the buyer; and
4)Covenant that the seller will warrant and defend the title of the buyer against lawful claims of other people.
If any of these covenants are violated, the buyer may be able to seek reimbursement from the seller.
The second type of deed in North Carolina is a special warranty deed, which may also be called a limited warranty deed. A special warranty deed typically includes the same protections given in a general warranty deed, but in a special warranty deed these protections only exist for defects in the title that are a result of actions of your seller, or arose during the possession of your seller. Thus, a special warranty deed does not protect the buyer from issues that arise before the buyer’s immediate seller purchased the property. Special warranty deeds may also be used to exclude one or more of the covenants normally found in a general warranty deed, thereby further limiting any recourse for the buyer.
The last type of deed in North Carolina is the quitclaim deed, which offers no protections for the buyer. A quitclaim deed is the equivalent of selling the property “as is” with no warranties or covenants to protect a buyer. With a quitclaim deed the buyer receives whatever interest the seller has in the property, with little recourse, if any, against the seller for problems that arise after the closing.
All deeds are not the same. The type of deed that the seller delivers at closing can make a vast difference if problems arise after the closing. As with any legal document, it is imperative that you understand what type of deed you will receive at closing and what warranties the seller is making. If you are unsure ask questions, it may make a world of difference.
Published by Davis W. Puryear on February 15, 2017