Real property was once transferred through a ceremonial act known as “livery of seisin” in which the person transferring the land passed a twig or clod of turf from the land to the person taking delivery of the land.
A verbal and/or written contract may have accompanied the gesture but only the “livery of seisin” legally transferred title to the property. Of course today, title to real property is conveyed by a deed. A property deed is a written and signed legal instrument that is used to transfer ownership of real property from a previous owner (the grantor) to a new owner (the grantee).
Deeds can be classified in numerous ways. Broadly, deeds are classified as official or private. Official deeds are executed pursuant to court or legal proceedings, such as trustees‘ deeds and tax deeds. Most property transactions, however, involve private deeds.
Deeds are also categorized based on the type of title warranty provided by the grantor. General warranty deeds provide the highest level of buyer protection, while quitclaim deeds typically provide the least.
Quitclaim deeds are most often used when transferring property between family members or to cure a defect on the title, such as a name that has been misspelled. Although they are fairly common and most real estate agents have experience dealing with them, they are generally used in transactions where the parties know each other – and are therefore more likely to accept the risks associated with the lack of buyer protection. They may also be used when a property transfers ownership without being sold, that is when no money is involved.
Because quitclaim deeds offer such limited buyer protection, it’s important to understand exactly what you’re getting when you buy property this way. Here, five things to know about these contracts:
1. You’re buying the least amount of protection of any deed.
Also called a non-warranty deed, a quitclaim deed conveys whatever interest the grantor currently has in the property, if any. The grantor only “remises, releases and quitclaims” his or her interest in the property to the grantee. No warranties or promises regarding the quality of title are made. The deed will clarify this by including language such as, “The Grantor makes no warranty, express or implied, as to title in the property herein described.”
In situations where the grantor under a quitclaim deed has no interest in the property, the grantee acquires nothing by virtue of the quitclaim deed and acquires no right of warranty against the grantor.
2. Only accept a quitclaim deed from grantors you know and trust.
Because quitclaim deeds make no warranty about the quality of the grantor’s title, they are generally used for low-risk transactions between people who know each other, and typically involve no exchange of money. Quitclaim deeds, therefore, are commonly used to transfer property within a family, such as from a parent to an adult child, between siblings or when a property owner gets married and wants to add his or her spouse to the title. Quitclaim deeds are also used when a married couple owns a home together and later divorceskj. When one party acquires the home in a divorce settlement, the other may execute a quitclaim deed to eliminate his or her interest in the property (and to comply with the court’s decision).
3. They can be used to clear a title defect.
A quitclaim deed is often used to cure a defect (a “cloud on the title”) in the recorded history of a real estate title. Title defects include items such as issues with wording (for example, on a document that does not comply with state standards), a missing signature (such as that of a spouse) or failure to properly record real estate documents. For example, if the name of a grantee is misspelled on a warranty deedplaced in the public record, a quitclaim deed with the correct spelling can be executed to the grantee to perfect the title.
As another example, assume a title search reveals that the spouse of a past grantor may have interest in the property because he or she did not properly execute a past deed in the chain of title. In this situation, the spouse of the past grantor can be asked to execute a quitclaim deed to the present owner “quitclaiming” any interest he or she may have in the property.
4. They’re as effective as a warranty deed to transfer title – but only if the title is good.
A quitclaim deed can convey title as effectively as a warranty deed if the grantor has good title when the deed is delivered. It is the lack of any warranties, however, that make a quitclaim deed less attractive from a grantee’s perspective. If the title contains a defect, for example, the grantee has no legal recourse against the grantor under the deed. A quitclaim deed is often used if the grantor is not sure of the status of the title (whether it contains any defects) or if the grantor wants no liability under the title covenants.
5. A quitclaim deed affects ownership and the name on the deed, not the mortgage.
Because quitclaim deeds expose the grantee to certain risks, they are most often used between family members and where there is no exchange of money. Due to this, quitclaim deeds typically are not used in situations where the property involved has an outstanding mortgage. After all, it would be difficult for many grantors to pay off a mortgage without proceeds from the sale of the property.
In some instances, however, quitclaim deeds are used when the grantor has a mortgage. In this case, the grantor remains liable for the mortgage even after ownership has transferred through the execution of a quitclaim deed. This is because quitclaim deeds transfer title but have no effect on mortgages. This situation can be made worse if the mortgage contains a due-on-sale clause, a common provision stipulating that the entire loan becomes due as soon as the title is transferred (not just if the property is “sold” with an exchange of money, as the name “due-on-sale” would seem to imply).
If the grantor has quitclaimed the property with the belief that the grantee will make the mortgage payments, the grantor has no recourse if the grantee stops making payments or sells the property to another party. To mitigate potential financial and legal troubles, the grantee can assume the mortgage with the lender (with the lender’s approval) or refinance the property and pay off the original loan. To add protection to the grantor, a legally enforceable agreement can be drawn to document the terms of payment.
The Bottom Line
The transfer of an owner’s title is made by deed. Certain essential elements must be contained in the deed for it to be legally operative. Different deeds provide various levels of protection to the grantee, and the obligations of a grantor are determined by the form of the deed. A quitclaim deed offers the least level of buyer protection and is generally used when the title is transferred between family members or to clear a defect on the title. If the property comes with what is known as a “special-purpose deed” – which could be a correction deed, a deed of gift or a deed of release – these usually offer no more protection than a quitclaim deed. Research them carefully, as well. And be sure to consult a qualified real estate attorney: Deeds are important legal documents that affect ownership interests and rights.
By Jean Folger November 17, 2017 — 6:11 AM EST