Key Takeaways

1. A special warranty deed provides limited guarantees: The seller (grantor) only warrants that there were no title defects or encumbrances during their period of ownership, not before.
2. Common in certain transactions: Special warranty deeds are often used in commercial real estate, foreclosures, and by entities or sellers with limited knowledge of the property’s history.
3. Buyers must conduct due diligence: Because the deed does not cover the entire history of the property, buyers should perform thorough title searches and consider title insurance.

Understanding Special Warranty Deeds

A special warranty deed is a legal document used in real estate transactions to transfer property ownership from a seller (grantor) to a buyer (grantee). Unlike a general warranty deed, which covers the entire history of the property, a special warranty deed only guarantees that the grantor has not caused any title issues or encumbrances during their ownership. This distinction is crucial for both parties to understand, as it directly affects the level of protection the buyer receives.

According to Investopedia, a special warranty deed ensures that the grantor owns the property and has the right to sell it, and that no encumbrances were incurred during their ownership. However, any title problems or claims that predate the grantor’s ownership are not covered by these assurances. This makes special warranty deeds less comprehensive than general warranty deeds, but more protective than quitclaim deeds, which offer no warranties at all.

How Special Warranty Deeds Work

The Grantor’s Limited Promises

A special warranty deed includes two main promises from the grantor:

1. Ownership and right to convey: The grantor promises that they legally own the property and have the right to transfer it.
2. No encumbrances during ownership: The grantor guarantees that no title defects, liens, or encumbrances were created during their period of ownership.

These promises are limited in scope. If a previous owner created a lien or there is an unresolved title issue from before the grantor took ownership, the grantee cannot hold the grantor responsible. This is a key difference from a general warranty deed, which covers the entire chain of title, regardless of when problems arose (LegalNature).

Common Uses of Special Warranty Deeds

Special warranty deeds are particularly common in situations where the seller is a temporary owner or has limited knowledge of the property’s history. Examples include:

• Foreclosure sales: Banks or other entities that acquire property through foreclosure often use special warranty deeds, as they cannot guarantee the property’s entire history (LegalZoom).
• Commercial real estate: Businesses may use special warranty deeds to limit their liability.
• Estate sales: Executors or heirs may use special warranty deeds when selling inherited property.

These deeds are also sometimes referred to as “limited warranty deeds” or, in California, “grant deeds” (Holland & Knight). Despite the different names, the core characteristics remain the same.

Comparing Special Warranty Deeds to Other Deeds

Special Warranty Deed vs. General Warranty Deed

The primary distinction between a special warranty deed and a general warranty deed is the timeframe of the guarantees:

• General warranty deed: Offers assurances for the entire history of the property, covering any title defects or claims, no matter when they arose.
• Special warranty deed: Only covers the period during which the grantor held title (Reddit).

This means that buyers receive less protection with a special warranty deed. However, in some transactions, especially where the seller is unwilling or unable to provide a full warranty, a special warranty deed is a practical compromise (Trust & Will).

Special Warranty Deed vs. Quitclaim Deed

A quitclaim deed provides no warranties or guarantees about the property’s title. The grantor simply transfers whatever interest they have, if any, to the grantee. In contrast, a special warranty deed provides limited assurances, making it a middle-ground option (LegalNature).

State Variations and Terminology

The terminology and use of special warranty deeds can vary by state:

• California: Known as a “grant deed.”
• Other states: May be called a “limited warranty deed” (Holland & Knight).
• Florida: Special warranty deeds are commonly used and provide limited guarantees (Florida Real Estate Lawyer; New Path Title).
• Texas: Special warranty deeds transfer title with both express and implied warranties, but only for the period of the grantor’s ownership (Silberman Law Firm).

It is important to check local laws or consult a real estate attorney to understand how special warranty deeds are used in your jurisdiction. The University of Maine provides a helpful overview of deed types and their differences.

Risks and Due Diligence for Buyers

Potential Risks

Because a special warranty deed only covers the period of the grantor’s ownership, buyers assume the risk of any title defects, liens, or claims that arose before that time. These could include:

• Unresolved liens or debts from previous owners
• Boundary disputes
• Unpaid homeowner association dues
• Unrecorded easements or encroachments (FastExpert)

Importance of Due Diligence

Given these risks, buyers should take proactive steps to protect themselves:

• Conduct a thorough title search: Investigate the property’s chain of ownership to identify any potential issues.
• Obtain title insurance: This can provide protection against many title defects not covered by the special warranty deed (Quicken Loans).
• Review public records: Check for outstanding liens, judgments, or other encumbrances.

Title companies and real estate attorneys can assist with these steps, ensuring that buyers are aware of any potential problems before closing.

Legal Implications for Sellers

A special warranty deed limits the seller’s liability to issues that occurred only during their period of ownership (LTGC). This can be advantageous for sellers who want to minimize their exposure to claims arising from earlier owners. Sellers may choose to use a special warranty deed if they are not comfortable warranting the property’s entire history or if the property has changed hands frequently (NC Realtors).

When to Use a Special Warranty Deed

A special warranty deed is suitable in various scenarios, including:

• Foreclosure or bank-owned sales: The seller has limited knowledge of the property’s past.
• Commercial real estate transactions: Parties may negotiate risk allocation.
• Estate or trust sales: Executors or trustees may not want to assume liability for unknown title issues.
• Short-term ownership: When the seller has not owned the property for long.

While special warranty deeds offer less protection than general warranty deeds, they can be appropriate when both parties understand and accept the limited guarantees (Schorr Law; Blueprint Title).

Conclusion

A special warranty deed is a widely used legal instrument in real estate transactions, providing limited guarantees about the property’s title. It is particularly useful when the seller is a temporary owner or lacks full knowledge of the property’s history. However, because the deed only covers the period of the grantor’s ownership, buyers must take extra precautions, such as conducting title searches and obtaining title insurance, to protect themselves from potential risks.

For more in-depth legal research and resources, attorneys and real estate professionals are encouraged to visit Counsel Stack.

Disclaimer: This guide is intended for informational purposes only and does not constitute legal advice. Real estate laws and practices vary by state, and there may be nuances and exceptions not covered here. Consult a qualified attorney for advice specific to your situation.