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Special Warranty Deed

December 5, 2023
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Key Takeaways

Introduction:

A special warranty deed is a type of deed used in real estate transactions, particularly for commercial property, where the seller warrants against any issues or defects in clear title that occurred during their physical ownership. 

Unlike a general warranty deed, which provides comprehensive guarantees for the entire history of the property, a special warranty deed only covers the period of ownership by the grantor.

Key Takeaways:

  • Special warranty deeds are commonly used in commercial property transactions where the seller only warrants against defects that occurred during their ownership.
  • These deeds are less comprehensive than general warranty deeds and may have different names in different states, such as covenant deed, grant deed, or limited warranty deed.
  • The grantor of a special warranty deed is only liable for issues or encumbrances to the title that they caused during their ownership, and the grantee assumes responsibility for any issues from previous owners.

How it Works:

A special warranty deed functions by transferring ownership or title of real estate property while providing limited guarantees. The grantor warrants against any defects or encumbrances in clear title that arose during their ownership period. 

However, it’s important to note that special warranty deeds do not protect against pre-existing defects or encumbrances from previous owners.

Key Components:

  • Transfer of Ownership: Special warranty deeds enable the transfer of property title from the seller (grantor) to the buyer (grantee).
  • Limited Guarantee: The grantor only warrants against issues or encumbrances that occurred during their ownership period, not before.

Benefits:

  • Useful for Commercial Transactions: Special warranty deeds are commonly used in commercial property transactions which often require far more nuance than residential transactions.
  • Clear Responsibility: The grantor is only liable for issues they caused during their ownership, and the grantee assumes responsibility for any issues from previous owners.
  • Protective Measures: Buyers can mitigate the risk of prior claims by purchasing title insurance to protect against potential defects or encumbrances.

Takeaway:

Special warranty deeds play a crucial role in real estate transactions, particularly in commercial property deals. They provide a limited warranty against defects and encumbrances that occurred during the grantor’s ownership period. 

However, it’s essential for buyers to conduct thorough due diligence and consider purchasing title insurance to protect against any unforeseen issues with the property’s title.

Understanding the differences between special warranty deeds and general warranty deeds is vital to ensure the appropriate use of each type in different real estate transactions.

Disclaimer: The information on this website, including glossary definitions, is for educational and informational purposes only and not intended as professional advice. While we strive for accuracy, we make no guarantees regarding the completeness, reliability, or timeliness of the information provided. We are not liable for any loss or damage arising from your use of the site. Investment decisions in commercial real estate should be made based on individual due diligence and professional advice. Laws and regulations are subject to change; always consult legal and financial experts before making decisions.

Sources:

https://www.investopedia.com/terms/s/special-warranty-deed.asp

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