What Are the Different Types of Deeds?
Most people know that real estate is transferred by deed. But many people don’t have a solid understanding of what a deed is, what the different types of deeds are, and why those differences matter.
What is a Deed?
A deed is a legal instrument, a document that is written and signed and serves as evidence of a legally enforceable act—in this case, the transfer of real property. Real property includes not only the land, but buildings on the land and legal rights that go along with land ownership. A deed is executed by the person transferring the real property, called the grantor. The person taking ownership of the property is the grantee.
In order to have the legal effect of actually transferring the property ownership from the grantor to the grantee, the deed must meet certain requirements. For instance, it must be in writing. Every state, including New Mexico, has standard deed forms, but a deed need not be on the form in order to be valid so long as it meets the other requirements, including:
- The deed must adequately identify the grantor(s) and grantee(s) and must adequately describe the property being transferred.
- The deed must be signed by the grantor. If more than one person owns the property, all must sign the deed as grantors.
- The deed must contain language that legally operates to convey the property.
- The grantor must be legally competent to execute a grant of the property, and the grantee must be legally competent to receive it.
- The deed must be delivered to the grantee. Someone acting on the grantee’s behalf, such as his or her attorney, may accept the deed.
- The grantee must accept the deed. It is rare for a grantee to reject a deed, but it can happen and if it does, the transfer of the property cannot be completed.
If all of the above requirements are met, the property is transferred from the grantor to the grantee. The grantee’s rights in the property depend on the type of deed executed.
What Types of Deeds Are There?
General Warranty Deed
With a general warranty deed, the grantor not only transfers real property to the grantee, but makes certain covenants (promises) to the grantee and the grantee’s heirs:
- The “covenant of seisin” is the grantor’s promise that they own the property and that they have the legal right to transfer the property.
- The “covenant against encumbrances” is the grantor’s promise that there are no claims (that have not been disclosed) against the property by someone who is not the owner. Mortgages and liens are common encumbrances, but easements are a type of non-financial encumbrance.
- The “covenant of quiet enjoyment” warrants that the grantor had clear (non-defective) title to convey, and that the grantee’s enjoyment of the property will not be disturbed by challenges to their ownership of the property.
- The “covenant of further assurance” means that the grantor agrees to furnish any necessary documentation needed to ensure clear title.
A general warranty deed provides the most protection to the grantee, as the grantor is warranting the validity of the title to the property and promising to defend it against any and all claims, whenever they arose.
Special Warranty Deed
While a “special warranty deed” sounds as if it provides special protections above and beyond a general warranty deed, in fact, the opposite is true. The “warranty” in a special warranty deed is that title to the property was conveyed to the grantor, and the grantor has not done anything in the interim to cause title to be defective. In other words, the grantee of a special warranty deed has no protection against defects to the title arising before the grantor assumed ownership.
The quitclaim deed offers less protection than both the general warranty deed and the special warranty deed; it is sometimes referred to as a “non-warranty” deed. In essence, by using a quitclaim deed, the grantor is conveying to the grantee whatever interest the grantor has in the property. For instance, I could execute a valid quitclaim deed conveying to you my interest in the New Mexico Governor’s Residence. But as I have no legal interest in the property, you wouldn’t, either.
Why would anyone execute, or accept, a quitclaim deed? Quitclaim deeds are often used between family members, such as one sibling transferring their ownership in a family home to another. They may also be used to clear title. For instance, if there is a question of someone having a claim against the property, they could execute a quitclaim deed to eliminate that issue. A quitclaim deed may also be used when the grantor is not confident of the status of the title and doesn’t want to be liable for any defects that are later identified.
Special Purpose Deeds
There are a number of deeds that are used to convey property in connection with legal proceedings. For instance, to convey property from a deceased person’s estate, an administrator’s deed (if there was no will) or executor’s deed (if there was a will) would be used.
A “deed in lieu of foreclosure” is executed by a borrower to a lender when the borrower is in default on a mortgage. This transfers title to the property to the lender, avoids foreclosure, and ends the loan.
A tax deed is used to convey a property that has been sold at auction to pay delinquent property taxes. A sheriff’s deed conveys an interest in property to a winning bidder at an execution sale. Execution sales are held when there is a judgment against a property owner; the property is sold and the proceeds used to satisfy the judgment. A gift deed is executed to transfer real property that is given as a gift, or for a nominal price (such as a dollar).
All of these special purpose deeds are types of quitclaim deeds. For instance, if you were to buy a property at an execution sale and later find out that the title was defective, you would have no claim against the seller.
Beneficiary Deeds/”Transfer on Death” Deeds
New Mexico also has a type of deed called a beneficiary or “transfer on death” deed. With a beneficiary deed, the owner of the property signs a document that someone else will have title to the property upon the owner’s death. The document must be recorded in the office of the County Clerk for the county in which the property is located. When the owner dies and their death certificate is recorded, title to the property automatically passes to the grantee. The property does not need to go through probate.
The grantee has no legal interest in the property until the previous owner’s death. Unlike other types of deeds, a beneficiary deed can be revoked at any time until the person who executes it dies. That means that, unlike a joint tenancy, the person who is to receive the property cannot sell their interest in the property or otherwise encumber it during the previous owner’s lifetime.
If You Have More Questions About New Mexico Deeds
If you need to transfer real estate to someone else, you may have more questions about deeds than were answered in this blog post. If so, please contact The Law Office of Dana M. Kyle to schedule a consultation.