Special warranty deeds (known as limited warranty deeds in some states) are useful for transferring title to a buyer in a real estate transaction. As opposed to quit claim deeds, which make no warranties, and general warranty deeds, which make all standard warranties, special warranty deeds make warranties to the buyer as to the status of the title. Basically, the seller, called the grantor in the deed, is promising to the buyer, or grantee, that the seller has proper title to the property and warrants the title against defects in clear title that may have arisen during the grantor's ownership of the property but not against any defects that may have arisen prior to the grantor's ownership.
Remember, the grantor is the party that owns the property and is selling or transferring title to the grantee. Grantors and grantees may be either individuals or business entities.
The general rule when answering these questions is to add one grantor for each current property owner that will be transferring title or otherwise changing his or her ownership interest; for instance, by adding a family member to share title. Note that if a grantor wants to remain an owner of the property and simply wishes to add additional owners on the title, then that grantor should be included as a grantee as well.
For example, if a married couple wishes to add their daughter as an owner, then each spouse would be named as a grantor and all three individuals will be named as grantees.
You will need to specify whether each grantor and grantee is a married individual, a non-married individual, a trustee, or a business.
If a party is receiving the property as a trustee, then the trustee should be named as the grantee, not the trust itself. The deed will state that the trustee is receiving the property on behalf of the trust. If there are multiple co-trustees, you may list the name of any one of the trustees. If a business is receiving the property, then you will name the business as the grantee and enter the name of the agent who will sign on behalf of the business. The agent should be someone with proper authority to sign binding contracts on the behalf of the business, such as an owner, executive, or manager.
You will be asked whether the grantee or grantees are receiving title as sole owners or co-owners. You should select "Sole owner" only if no other person will share ownership with the grantee after the deed is signed. Select "Co-owner" if more than one person or business will share ownership of the property with the grantee after the deed is signed. This would be the case, for example, if the grantor is a tenant in common and is transferring his or her interest to the grantee. The other tenants in common would not necessarily join in the deed as grantors, since only the grantor is changing his or her interest.
If there will be only one owner of the property, then you will name the grantee as the sole owner. On the other hand, if there will be multiple owners, then select co-owner when prompted. If the grantees are co-owners, then you will select the type of joint property interest the grantees are sharing with one another. Each state allows different types of joint ownership, but these typically include tenancy in common, joint tenancy, tenancy by the entirety, community property, and partnership.
A tenancy in common is a form of co-ownership wherein each tenant (property owner) owns an interest in the entire property. The tenants are not required to hold equal shares, so one tenant might own three quarters of the property while another only holds a quarter interest. The owners are free to sell or give away their individual interests without needing the other owners to sign the deed. If an owner passes away, their interest will be controlled by their will or under state intestacy law when no will exists. The ease and flexibility offered by a tenancy in common makes this joint interest a favorite for multiple businesses wishing to share ownership.
A joint tenancy is similar to a tenancy in common but with some key distinctions. First, every owner must hold an equal interest. For instance, four owners will each hold a quarter interest. Second, the owners may not sell or give away their interests without the consent of the other joint tenants. Each tenant is therefore required to sign any such deeds. Finally, the joint tenants all have the right of survivorship. This means that when an owner passes away, their interest automatically transfers to the other joint tenants in equal shares.
The tenancy by the entirety and community property interests are essentially the same, with some states using one name and other states using the other. However, some states do not allow these property interests. These two interests work in the same way as a joint tenancy but may only be held by married couples. Our questionnaire will automatically include the permitted property interests for your state.
California allows businesses to share property ownership as a partnership. This form of ownership is similar to a tenancy in common but may offer benefits under state law.
You will need to register your deed with the appropriate office, usually called the County Recorder’s Office or County Clerk’s Office. Every county has slightly different rules as to what must be included on the deed, how the deed is formatted, and the steps you need to follow in order to register the deed, and these rules are constantly changing. For this reason, we strongly recommend calling your local office to ensure that you have met their various requirements prior to going to the office to file your deed.
Be sure to not write in the page margins of the deed. Many offices require these to be kept blank. LegalNature’s special warranty deed uses one-inch margins, except for a three-inch margin at the top of the first page.
A deed is considered legal and effective once each grantor has signed it and the deed is delivered and accepted by the grantee(s). However, a few counties across the U.S. also require that each grantee sign as well, especially in Kentucky. It is a good idea to ask your local office if grantees must sign. If this is the case or you just want to be on the safe side, then have each grantee handwrite on the signature page below the grantors, “I, [print name], accept this deed” followed by his or her signature. Note that anyone signing the document must wait to do so until in the presence of a notary, who will complete the attached notary acknowledgment.
At this point your deed has been legally executed. However, it is important to record it with your local office as soon as possible in order to protect the grantees’ ownership claim. Provide a copy of the recorded deed to each person who signed it. Normally, your local office will return the original deed to the grantees, who in turn send copies to the grantors.