If you own a parcel of real estate in Michigan, you likely have a written deed in your possession that formally conveys title to you. This document contains the name of the grantors and grantees of the property, the legal description of the real estate, and the amount of consideration (e.g. the money exchanged) by the buyer for title from the seller, if any. Your deed is likely one of three types of deeds: a warranty deed, a covenant deed, or a quit claim deed. It is important to understand what type of deed you possess because this determines what kind of rights and responsibilities you have to your piece of land. This article will focus on warranty deeds.
A warranty deed, like the other deeds, conveys an ownership interest in the real estate to the grantee or buyer. However, a warranty deed also conveys a promise that the grantor is transferring good and clear title to the grantee. When a warranty deed is conveyed, the grantor is making a conveyance in “fee simple” (a vested, inheritable and present possessory interest in land) with the following six implied promises, or “covenants”, made according to MCL 565.151:
- (1) That the grantor is lawfully seized of the premises: Known as the “covenant of seisin”, the conveyor of property is guaranteeing that he or she holds present valid title to the property and is currently in possession of said property.
- (2) That the grantor has good right to convey the same: Known as the “covenant of right to convey”, the conveyor of property is guaranteeing that he or she has the legal right and ability to convey both title to and possession of the property.
- (3) That the grantor guarantees the quiet possession of the property thereof: Known as the “covenant of quiet enjoyment”, the conveyor of property is guaranteeing that the grantee will able to access and use the property without restrictions other than those stated in the deed or prohibited by law.
- (4) That the property is free from all encumbrances not listed on the warranty deed: Known as the “covenant against encumbrances”, the conveyor of property is guaranteeing that the property transferred to the grantee is free of any liens or restrictions except for those stated in the deed.
- (5) That the grantor will warrant the title: Known as the “covenant of warranty”, the conveyor of property promises that the grantee may defend (and he or she has the duty to help defend) against any claims of others to the property because no claim is more superior than that of the conveyor of property.
- (6) That the grantor will defend the title against all lawful claims: Known as the “covenant of future assurances”, the conveyor of property promises that he or she will protect and defend the grantee against anyone else in the world who comes forward with a purported superior claim in title to said property.
If you are the buyer of real estate, then you would want to get a warranty deed from the seller whenever possible. This is the maximum protection possible you can get for ensuring you received good title because it confers on the seller the continuing legal responsibility to ensure protection from future claims against the title. A buyer with a warranty deed is also more likely to get a title insurance policy which will protect against losses arising when a lien or encumbrance not previously disclosed is discovered after a title transfer occurs. In addition, a buyer that needs to secure lending to purchase the property will likely need both a warranty deed and a title insurance policy before a mortgage company is comfortable providing a loan for the property.
A seller of property would prefer to give a property deed with less protection than a warranty deed to reduce the amount of legal responsibility associated with unknown factors about the property. Some other deed options include the following:
- Quitclaim Deed – This type of property deed conveys all of the interest in the property that the grantor has to the grantee, but provides no warranty or protection for the buyer from the seller against possible superior claims to the property. The seller has no liability if the buyer later incurs a loss due to a previously unknown lien or encumbrance on the property, so there is a significant risk. The buyer would not likely be able to obtain title insurance on this transaction due to the lack of title search involved or warranties provided. Quitclaim deeds are still perfectly legal and are often used for gifts, transactions among family members, corrections in title defects, transfers pursuant to court orders such as divorce decrees, and transfers from grantors to a living trust.
- Covenant Deed (Also Called a “C”-Deed or “Special Warranty” Deed) – This type of property deed provides a limited warranty of title to the grantee. The grantor transferring the property is guaranteeing that he or she has not committed any acts or omissions during his or her ownership that would cause title problems, but makes no guarantees about what might have happened before he or she acquired the property. This type of deed might possibly appear when purchasing a property from a bank that originally obtained it from foreclosure or when a grantor transfers property to a trust or business that he or she owns or controls. It is possible to get title insurance on these types of deeds, but it may be more expensive. Technically, giving someone a document entitled “warranty deed” without all of the six implied covenants is illegal in Michigan, so these covenant deeds often take the form of a “quitclaim deed” with some covenants added.
- Fiduciary Deed – This type of deed is usually seen when a fiduciary (e.g. trustee or personal representative) is conveying an interest in property from a trust or decedent’s estate to a grantee. There may or may not be some covenants in the fiduciary deed, but if they do exist then they only bind the trust or estate (not the fiduciary personally). Some fiduciary deeds take the form of a so-called “limited warranty deed”, meaning that the fiduciary guarantees that he or she has not done anything since acquiring the property that would impair its title. The fiduciary will also attest that he or she has the legal authority to sign the deed on behalf of the actual owner. However, most fiduciaries avoid giving any warranties whenever possible to protect the assets in their care, so the grantee will normally receive a deed from the trust or estate that is practically a quitclaim deed.
Some people are tempted to do their own property transfers from forms and templates that they found online. However, this can lead to problems in the future for both the buyer and seller if they don’t know what they are doing. Sellers may not understand all of the responsibilities that they retain when they give away property via a warranty deed when the title history contains many problems. Buyers and their successors can tie up the seller in court for years in a quiet title action and even independently sue the seller for money damages on allegations of fraud and misrepresentation.
Even worse, a seller might try to give someone a document entitled “warranty deed” but it actually does not provide one or more of the six implied covenants on its face. This type of warranty deed that is NOT an absolute warranty deed not only exposes the seller to civil liability but also makes him or her guilty of a crime. MCL 750.275 provides as follows:
- “Any person who shall print, sell or keep for sale any blank forms of deeds containing the words ‘warranty deed’, or ‘warranty-deed-covenant-own-acts’, or any similar words printed or written thereon, unless such deed is in fact an absolute warranty deed, and any person who shall knowingly use any such deed for the purpose of conveying title unless the same is an absolute warranty deed, shall be guilty of a misdemeanor.”
A person convicted of this offense can be sentenced to a fine up to $500.00 or serve up to 90 days in jail, or both.
If you are in the process of selling or buying property, then there is no substitute to competent legal advice to ensure everything is done appropriately. A skilled property lawyer in your corner can advise you of all the consequences of a warranty deed and ensure that the transaction is carried out smoothly.
If you have any additional questions about property law or need legal representation, then do not hesitate to contact Kershaw, Vititoe & Jedinak PLC for assistance today.