The title to a house can be conveyed from one owner to the next by through a transfer of a deed. Different kinds of deeds provide different levels of risk for the person acquiring the title. Among the various types of deeds, one with a moderate level of risk is the grant deed.
Why Use a Grant Deed?
If you are receiving a grant deed, it could be because you’re in California, where they are often used in sales. Perhaps you are receiving property from a trust. Or perhaps you’re buying the home in a foreclosure or a tax sale.
In some states, the grant deed can be used in divorce settlements. Grant deeds are also used to transfer property to a trust or LLC, for multi-unit property sales, and when the transferor of the deed wants to avert legal obligations for title defects possibly arising on the watch of a previous owner. Often, the grant deed works to convey a title without triggering a new property tax assessment.
As a general rule, a grant deed offers stronger buyer protection than a quitclaim, but carries a higher level of risk than a general warranty deed.
In some states, people refer to a grant deed as a special warranty deed. These types are similar, though there are nuanced and state-specific differences and title companies in your state may classify the two as separate types. A bargain and sale deed can also resemble a grant deed, if it includes covenants. But bargain and sale deeds do not assure their recipients of clean titles.
What Protections Does the Grant Deed Offer?
A grant deed assures the recipient of just two protections: (1) that the transferor of the deed did not already transfer the property title to someone else, and (2) that the property is free of liens and encumbrances, except as expressly stated in the deed.
Thus, a grant deed:
- States that the title is conveyed free and clear of claims arising when the grantor (the transferor of the deed) held the title.
- Asserts that all known liens and other encumbrances on the property have been disclosed. In practical terms, this means the deed should disclose any burdens of title created by the transferor: assessments; conditions, covenants and restrictions; any liens and leases; easements, encroachments, and rights of way. No undisclosed taxes or other legal or financial issues may loom that could make the property difficult to sell.
The grant deed implicitly conveys a free and clear title, as opposed to the warranty deed, which does so expressly. Yet with the grant deed, claims could have arisen before the time the grantor held the property. In contrast to the warranty deed, the grant deed does not compel the grantor to step up and cover the costs of defending the title against those earlier and unexpected claims.
In the next section, we take a closer look at the workings of the grant deed — particular as it is used in California.
What’s in a Grant Deed?
Each state that recognizes grant deed has its own rules and customs. The home property’s state and county control the required language, format, and procedural rules. A typical deed shows the date, the property description, the parties’ names and a statement conveying the title from grantor to grantee (the “granting clause”), and is signed by the grantor. Following best practices, the grantor’s transfer should be witnessed and notarized. The grantee typically pays the county recorder a minor fee.
To consider one state’s example, a grant deed in Florida is allowed. Though it’s rarely used, and not named as a Florida deed in the state’s statutes, it may nevertheless be recorded in Florida counties.
In California, in contrast, there’s a lot to say about grant deeds, because grant deeds and quitclaims are generally considered the two key instruments for real estate conveyances. As long as the term “grant” appears in the conveyance provision on the deed, it is effective, once signed, delivered, and accepted. (The quitclaim is used instead to transfer California property without assurances that the transferor actually holds a property interest.)
So, we’ll use California as an illustration of important factors to consider and discuss with your real estate attorney when creating a grant deed.
California’s Civil Code, Section 1092, allows the use of this deed type. As the state sets forth:
- A grant deed’s implied covenants are enforceable by the deed’s named recipient — not later buyers. In contrast, easements and restrictions “run with the land” and do bind future owners. The conveyance should set forth the covenants that run with the land as binding those future buyers, also known as remote grantees.
- California further notes that any condition in the purchase agreement — for example, a reserved easement or a life estate — must be restated in (merged with) the grant deed to be enforceable against the title. The grant deed must be the only instrument through which the buyer and seller enforce their rights.
- The California county assessor’s office accepts the deed for filing with the required fees and tax affidavit. If the property changes hands, expect a property tax reassessment. Transfers to joint owners and immediate family, or into trusts or LLCs, may obtain a reassessment exclusion, and the exemption should be stated on a preliminary change of ownership report (PCOR). File the deed and PCOR together.
☛ Specific language is necessary to create a valid grant deed in your state and county. We ensure the correct language is included in our forms, making them valid where the property exists. See our downloadable grant deed forms with step-by-step instructions and sample finished deeds.
Note: For a valid grant deed, the whole property must be transferred during the grantor’s life, and the grantee must accept the deed.
Limiting Risk With a Title Policy
A grant deed itself limits the recipient’s risk in key ways. Yet there is always the risk of a claim arising from a time before the transferor held title. If that happens, what recourse will the new owner have?
In California, buyers often depend on title insurance companies to guide real estate closings as well as to offer appropriate title policies.
Buyers should strongly consider an owner’s title insurance policy. This is in addition to a lender’s policy, which is required for a mortgage.
Title insurance companies research the chain of title to check that it has been correctly transferred. This search is a vital safeguard. Yet title searches can and do miss issues. Should that occur, the owner’s title insurance policy will back the owner who needs to remedy any defects.
To Sum It Up…
Through the grant deed, a new owner takes over a property title, accepting the express exceptions set forth on the deed. Parties who transfer the title with a grant deed are assuring the recipient that they have not created any title problems. Yet they do not make assurances regarding anything that could have occurred before they held the title.
A grant deed offers less protection than the warranty deed, by which the grantor guarantees the title against all claims. A grant deed offers more protection than a quitclaim, which simply transfers any interest in a property that a transferor might have.
When deciding whether to accept a deed that carries more risk that a general warranty deed, consult with a title insurance expert and a local residential real estate lawyer. When accepting a grant deed in places where it isn’t customary, this is especially important.
First Tuesday Journal: Brokerage Reminder: Grant Deed Vs. Quitclaim Deed – Deeds of Conveyance (Nov. 2020).
And as linked. Photo credit: Andrea Piacquadio, via Pexels.