A deed is a legal, written document used to transfer or signify ownership of real property, or certain types of personal property. A deed is commonly required for the transfer of land, as such a transfer can only be made in a specific manner prescribed by law. The deed is signed by the person transferring the land (the “grantor”), conveying the title and ownership of the land to another individual or entity (the “grantee”). Because a deed is the written instrument by which actual ownership of a property, it serves as proof of ownership. To explore this concept, consider the following deed definition.
Definition of Deed
- A signed and witnessed document transferring legal ownership of a piece of land, a building, or other property, to another person or entity.
- The act of giving someone ownership of a piece of land, a building, or other property.
Before 900 A.D. Middle English dede
What is a Deed
A deed, referred to in ancient history as an “evidence,” is the legal term used to describe a legal written document that passes interest in, or ownership of, property. The deed then serves to confirm, or affirm, the owner’s right and interest in the property. A deed may be executed only by the party transferring ownership of the property to someone else, called a “unilateral” execution, or it may be executed by both parties to the transaction, called a “bilateral” execution. In modern times, most deeds are unilaterally executed, with the terms of the transaction detailed in another document, called a contract.
Technically, while deeds are most commonly used in real property transfers, the term also refers to documents conveying or confirming rights granted by such things as patents, licenses, diplomas, commissions, conveyances, and conditional powers of attorney.
A quitclaim deed summarily transfers ownership in a piece of property to another individual or entity, often without consideration. By using a quitclaim deed, the grantor terminates (“quits”) ownership, right, and claim to the property, transferring those rights to the grantee. Unlike a regular deed, a quitclaim deed has no warranty of the status of the title. This means that the grantee gains only whatever interest the grantor held in the named property at the time of the transfer. In fact, there is no guarantee that the property is free of liens or encumbrances, or that the grantor actually owned any interest at all in the property. For this reason, the use of a quitclaim deed is a risky prospect for someone purchasing, or otherwise providing consideration the property.
For example, Michael makes a deal with his drinking buddy to trade his classic comic book collection for a piece of property that would be a prime location for a mini-mart and gas station. His buddy, “Bob,” signs over the property using a quitclaim deed form, and Michael hands over his collection. When Michael files the quitclaim deed form with the county recorder, he discovers that “Bob” didn’t own the property to begin with. When Michael heads to their favorite watering hole to get an explanation, he finds that Bob never again returns.
Because there is no warranty as to the title status when using a quitclaim deed form, these types of transfer are generally used for the purpose of transferring property between family members, to move property into a business entity, or to give property as a gift. Quitclaim deeds are, therefore, rarely used to transfer property from a seller to a buyer, but between parties that have an existing relationship, or in transactions in which the grantor and grantee are the same individual or entity.
A warranty deed is commonly used to transfer property in which the terms of the deed guarantee that the grantor has the legal right to transfer the property to another, and that no other person or entity has a claim or lien against it. There are two types of warranty deed: (1) a general warranty deed, which protects the grantee from defects in the title clear back to the property’s origin, and (2) a special warranty deed, which protects the grantee only from defects arising from any acts or omissions of the current grantor. This means that, if a defect in title existed before the grantor took ownership of the property, that problem still exists, and transfers to the grantee.
Warranty deeds include six forms of Covenants for Title, or warranties, which are broken down into “present covenants,” and “future covenants.”
Present Covenants for Title
- Covenant of Seisin – a covenant that the grantor has the legal right, or a “good right,” to convey the property.
- Warranty of Title – a seller’s (“grantor’s”) promise that he has the legitimate title of the property he is conveying.
Future Covenants for Title
- Covenant of Warranty – an assurance or promise that the grantee will be able to use the property without fear of disruption by an overriding or superior title.
- Covenant of Quiet Enjoyment – a promise by the grantor to protect the grantee against future claims of superior title by someone else.
- Covenant of Further Assurances – a requirement that the grantor take affirmative action to cure any defects that might exist in the title.
Some states allow the use of a grant deed as the middle ground between a quitclaim deed and a warranty deed. While a warranty deed guarantees that the property is currently free of encumbrances, it also guarantees that the grantor will take future action should claims against the title occur. A grant deed guarantees only that the grantor has not sold the property to anyone else, and that there are no restrictions or liens against the title that have not been disclosed to the grantee. No future protection is guaranteed with the use of a grant deed.
Performing a Title Search
It is a good idea for anyone considering the purchase of real property, or in accepting title to real property in any transaction, perform a title search to discover whether any defects in title exist. It is always easier to be sure such defects are resolved before the property is transferred. In a real property transaction, a title company is often used to perform the title search, and the company is able to issue “title insurance” to guaranty that their search results are valid. Individuals can, however, do their own title search if desired.
Most counties make their property records available online. Individuals who prefer the hands-on approach may find the written records at the county recorder’s office, however. Begin by finding the current owner’s deed to make sure the property was transferred correctly to him. Next, follow the records back at least 50 years. There should be a clear chain of title going back, with evidence of each lien or encumbrance being released and discharged.
Doing a title search is like putting together a puzzle piece by piece. Some of the things that could affect obtaining clear title to a property include outstanding federal or state tax liens, mortgages, or even probate issues.
Deed of Trust
When a property is purchased through the use of financing, such as a mortgage, a deed of trust is used to transfer legal ownership of the property through a trustee, rather than directly to the person or entity who must repay the loan. In such cases, the deed of trust transfers title to a title company or a trust, to be held as security (or “escrow”) for repayment of the loan. Once the loan has been paid off, the trustee or title company transfers title to the borrower by releasing the deed of trust, or by recording a release of lien, terminating the trustee’s contingent interest in the property. If the borrower defaults on the loan, the trustee or title company usually sells the property with a new deed, forwarding the proceeds to the lender.
Deed in Lieu of Foreclosure
When a homeowner falls seriously behind on mortgage payments, the bank or mortgage company may choose to foreclose on the property, taking ownership from the mortgage holder in a process that is usually very stressful for the homeowner. The homeowner may negotiate a deal with the mortgage holder to transfer the property by completing a deed in lieu of foreclosure, which terminates the homeowner’s liability for the debt, and transfers ownership of the property immediately to the lender.
The terms of an agreement for deed in lieu of foreclosure are very negotiable, and often depend on the strength of position of each party. Whatever the other terms, the filing of a deed in lieu generally conveys the property in full satisfaction of the loan obligation. If a homeowner considering this type of transaction is unsure of the provisions included in the documents sent by the lender, it is a good idea to consult an attorney before signing. In some cases, the lender fails to release its right to pursue the borrower for the balance remaining on the loan after the property is sold. This defeats the purpose of the deed in lieu of foreclosure, as far as the borrower is concerned.
Contract for Deed
A contract for deed, also referred to as a “land contract,” is an agreement between a seller and buyer of land, in which the property is financed by the seller, rather than a bank or credit union. The use of a contract for deed is a popular method of helping low- to moderate-income families, which would be unable to obtain financing through traditional means, to purchase a home. In a contract for deed, the parties come to an agreement as to the purchase price, interest rate, and payment terms, specifying the monthly payment amount and other terms in the contract.
When using a contract for deed, the seller retains title to the property until the loan is paid off, but the buyer takes possession of the property for every other purpose. Once the terms of the loan have been fulfilled, the seller is obligated to transfer the property title to the buyer by executing and filing the deed with the county recorder.
Related Legal Terms and Issues
- Consideration – A benefit bargained for between parties to a contract.
- Encumbrance – A mortgage or other charge or lien against property or assets.
- Lien – The legal right of a creditor to keep or sell property given as collateral when the debtor fails to meet the obligations of the loan or purchase contract.
- Omission – The act of excluding or leaving something out; a failure to do something, especially something for which there is a moral or legal obligation to do.
- Power of Attorney – A legal document in which one person gives another person authority to act as an agent on his or her behalf.
- Real Property – Land and property attached or fixed directly to the land, including buildings and structures.
- Warranty – A guarantee or promise as to the quality or usability of a product or service sold.