Real estate transactions may use different types of deeds, depending on the nature of the transaction and the specific circumstances. If you plan to transfer real estate to a trust or leave it in your will, or if you are a trustee, it’s important you understand what a special warranty deed is and how to draft one.
What Is a Special Warranty Deed?
A special warranty deed is one way that a grantor can transfer their interest in real estate to a grantee of their choice. A special warranty deed conveys the grantor’s ownership of the property, but it does not provide the same guarantees as a general warranty deed. Instead, it only provides promises and warranties based on the current owner only, not on any history prior to that of the current owner.
How Special Warranty Deeds Work
A special warranty deed covenants the following:
- The grantor is the owner of the property
- The property has not incurred any unresolved liens or encumbrances during the seller’s ownership of the property
- The grantor has not sold the property to anyone else or signed over the property title to a new owner
However, what makes the deed “special” is that these guarantees only apply to the grantor’s period of ownership. The grantor makes no guarantees about what might have happened before they assumed ownership of a property.
Special warranty deeds may provide more comfort to the current owner of the property because they do not have to worry about property transactions that occurred before their ownership, so they can more confidently make these guarantees. However, the new owner of the property takes ownership without the guarantee of a clear title.
LIke with other types of deeds, the special warranty deed needs to be recorded with the county clerk to be effective. Property deeds are public records, so anyone can potentially locate them.
Potential Uses of Special Warranty Deeds
Special warranty deeds are not as commonly used as other types of deeds like general warranty deeds or quitclaim deeds. They lie somewhere in the middle of these two common deeds. They are more often used to convey commercial real estate or property purchased through the foreclosure process. They are also used in the world of estate planning and estate administration which often involve the administration of trusts and wills. They are used by trustees of trusts and executors of wills to sell property. See the FAQ section below for more detail.
How to Draft a Special Warranty Deed
There are certain legal requirements to make a special warranty deed. This deed must generally include the following information:
- The name of the grantor and grantee
- The address of the grantor and grantee
- A legal description of the property
- A statement the grantor is conveying the property to the grantee
- The covenants that the seller has the legal right to sell the property, has not placed liens or encumbrances on the property during the seller’s ownership, there are no outstanding claims against the property during the seller’s ownership, and the grantor has had a clear title during their specific period of ownership
- A signature of a notary public
- The date of signing
The above requirements are not exhaustive. If you have questions about whether a special warranty deed should be drafted, you can reach out to an experienced real estate law firm or estate planning attorney for legal advice.
Different Types of Deeds
Here are a few of the most common types of deeds and how they compare:
| Type of Deed | Characteristics |
| General Warranty Deed | A general warranty deed guarantees there are no liens against the property, the seller has the legal right to sell the property, the seller holds full ownership of the property, and the seller will pay any costs associated with defending the title. |
| Special Warranty Deed | A special warranty deed makes the same guarantees as a general warranty deed, but only for the grantor’s period of ownership. Therefore, there is no guarantee of no title defects stemming from a previous owner. |
| Beneficiary Deed | The grantor conveys the property to a new owner, but the transfer only occurs at the grantor’s death. |
| Quitclaim Deed | A quitclaim deed makes no guarantees about the property, not even that the grantor has the legal right to sell the property. |
General Warranty Deed vs. Special Warranty Deed
A special warranty deed is a variation of a general warranty deed. The main difference is that the guarantees about the property for a special warranty deed are only based on the grantor’s period of ownership and not the entire history of the real property. Therefore, the special warranty deed provides less protection to buyers than a general warranty deed.
Similarities and differences between general warranty deed and special warranty deeds include:
| Characteristic | General Warranty Deed | Special Warranty Deed |
| Identification of parties and property on the deed | Grantor, grantee, and legal description of the property | Grantor, grantee, and legal description of the property |
| Liens or other encumbrances | The property is free of debt or encumbrances other than those specifically identified in the deed | The property is free of debt or encumbrances other than those specifically identified in the deed during the seller’s ownership period |
| Legal right to sell the property | Grantor warrants they are the legal owner of the property and have the right to sell the property | Grantor warrants they are the legal owner of the property and have the right to sell the property |
| Defense of the title | Grantor guarantees they will pay costs to defend the title from third-party claims | Grantor guarantees they will pay costs to defend the title from third-party claims related to their period of ownership |
| Period covered | The history of the real property | Only the grantor’s period of ownership |
| Types of real property | Any | Mostly commercial real estate and foreclosure properties |
| Conveys current interest in property? | Yes | Yes |
| Responsible for title defects or problems before the grantor’s period of ownership? | Yes | No |
Example of a Special Warranty Deed
Let’s look at an example of when a special warranty deed might be used and the legal effect. Suppose Mark owned a piece of real property. Mark got behind on property taxes and had code enforcement issues because he let the property get in disrepair. Mark sold the property to Diana.
Diana was a good owner of the property and kept the property in good order. Knowing that Mark wasn’t the best owner, Diana decided to use a special warranty deed when selling the property to Courtney. Diana warranted that there were no liens or encumbrances on the property during her period of ownership.
Courtney has now inherited the problems that Mark created. Diana is not responsible for resolving the unpaid property taxes or the code enforcement issues because those problems did not arise during her ownership of the property. Courtney is now responsible for those issues.
If Diana would have signed the property over with a general warranty deed, Diana would have been responsible for resolving the title defects and problems.
Benefits of Special Warranty Deeds
First, it’s important to note that special warranty deeds generally favor the seller, not the buyer. So, if you’re selling a property, a special warranty deed may limit your liability when transferring the property.
For buyers, special warranty deeds are sometimes used to purchase foreclosure properties. Because the bank knows that the property may have title defects or other problems, they may sell these properties at a considerable discount.
Buyers can often mitigate the risks when a special warranty deed transfers the property by purchasing title insurance from a title insurance company. During this process, the company conducts a title search on the property to see if there are any outstanding claims or title issues involving the property. If the title insurance company does not find any title defects, it issues title insurance and will defend the title.
Risks of Special Warranty Deeds
Special warranty deeds pose a risk to the new owner because the guarantees only apply to the grantor’s period of ownership. There could be creditor claims or title defects stemming from a previous owner.
Special Warranty Deed FAQs
Here are some of the most frequently asked questions regarding special warranty deeds:
What Are Other Names for a Special Warranty Deed?
Special warranty deeds go by many other names, including:
- Limited warranty deed
- Grant deed
- Covenant deed
That said, it’s very important not to rely on these synonyms and check with a professional before assuming one of the above deeds is a special warranty deed.
When Are Special Warranty Deeds Used?
Special warranty deeds are often used in commercial real estate transactions. This is because commercial real estate transactions typically involve a more complex ownership history that’s riddled with foreclosures. For residential real estate, special warranty deeds are sometimes used, but more specifically in situations where there are foreclosures and forced sales of property to satisfy a debt to the mortgage lender or another creditor.
Beyond the above, special warranty deeds are often used by trustees that are managing and administering a trust, or executors of a will. This is simply because the trustee or the executor can’t be held liable for prior ownership history of the property as they are doing their job, which is to manage the properties for the benefit of the beneficiaries on behalf of the decedent. In other words, special warranty deeds are an asset in estate, estate planning, and estate administration matters.
Should I Use a Special Warranty Deed?
Whether or not you choose to use a special warranty deed depends on the situation, your personal preference, and the pros and cons in your particular situation. If you are a seller, using a special warranty deed would limit your potential liability because you are only making guarantees that apply to the time period when you owned the property, so you are in the best position to know that these guarantees are accurate.
However, if you are a buyer, you may want to push for a deed that provides more protection, such as a general warranty deed. With a special warranty deed, you could be assuming title defects that arose before the ownership of the current owner. Nonetheless, if you are getting the property at a discount, you may be willing to use a special warranty deed, especially if you have the added protection of title insurance.
How Can I Find Out If There Are Any Title Defects on a Special Warranty Deed Property?
A title search can help uncover liens or other claims to the title of a property. Title searches review all available and relevant public records relating to a property to determine if there are any title defects. Often, title insurance companies offer this service. Title insurance is an indemnity insurance that protects a buyer from third-party claims against the title.
Takeaway
A special warranty deed is a legal document that conveys ownership from a grantor to a grantee. However, it only covers the grantor’s period of ownership and does not provide any covenants regarding previous owners. Therefore, it is important to weigh the possible risks and benefits before using a special warranty deed.