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 quitclaim deeds exclusively.
A quitclaim deed is a deed that transfers whatever title or interest that the grantor has in the property to the grantor without any warranty of title whatsoever. It is sometimes called a “non-warranty deed” for this reason as the document will show that the grantor “conveys, alienates, remises, releases and quitclaims” the property but the word “warrant” will not appear anywhere. In fact, the quitclaim deed will further clarify by stating “the grantor makes no warranty, express or implied, as to title in the property described.”
When you receive a quitclaim deed from someone, you are taking a risk as to ALL of the following:
- The seller is making no warranty as to title so he or she has no obligation to defend you if someone else comes forward alleging that they have a superior claim to the property. This means that the buyer bears the burden and expense of defending his or her acquired title in a court of law without any assistance from prior owners.
- The seller is making no promise that the property is accessible for quiet use and enjoyment. If the property is affected by the adverse possession of a neighbor (who could acquire title if the occupation is open, notorious, adverse and uncontested over a 15 year period), it could be subject to frequent trespass by other persons and objects, or its use is complicated by a private or public nuisance. The buyer of a quitclaim deed takes the land as he or she acquires it.
- The seller is making no promise that he or she has valid title or even possession of the property. The quitclaim deed only transfers whatever interest he or she purports to have in the property, whether that interest be a present interest, a future interest, a mistaken interest or even an imaginary interest. You receive whatever the seller has, even if that turns out to be nothing.
- The seller is making no promise that he or she has the legal right to convey his or her interest in the property even if an actual interest exists. The ability to convey may be restricted by another deed, contract, court order or by the infancy, infirmity or even the insanity of the grantor.
- The seller is making no guarantee that the property is not encumbered by any other liens, mortgages or other interests. If these other encumbrances are discovered later and leads to some kind of financial loss, then there is no recourse against the seller for this. Due to the lack of title search before the conveyance, the buyer may have problems securing title insurance for a quitclaim deed or lending by a mortgage company.
A grantor would try to convey a property by quitclaim deed to a grantee whenever possible to retain the least amount of legal liability to the property. This is the least desirable deed to a buyer of property who wants some assurances to their purchase. In the vast majority of property transfers between strangers in Michigan, the seller often conveys a “warranty deed” to the buyer which includes the following six covenants:
- Covenant of Seisin – Grantor guarantees he or she has legal title and possession of the property.
- Covenant of Right to Convey – Grantor guarantees he or she has the legal ability to convey the property to the grantee.
- Covenant Against Encumbrances – Grantor guarantees that the property is not encumbered by any liens or mortgages other than those specifically mentioned in the deed.
- Covenant for Quiet Enjoyment – Grantor guarantees that the grantee has the right to quiet possession and use of the property.
- Covenant of Warranty – Grantor guarantees he or she is transferring valid title and possession that the grantee has the right to defend against.
- Covenant for Further Assurances – Grantor guarantees he or she will defend the grantee’s title against any claims of superior title from others that arise in the future.
A quitclaim deed has none of these warranties or protections, meaning that the buyer assumes the seller’s purported interest in the property at his or her own risk and expense.
The drawbacks of the quitclaim deed do not render it unconscionable or illegal. In fact, the quitclaim deed is perfectly legal under Michigan law and used frequently throughout the state. “A deed of quit claim and release, of the form in common use, shall be sufficient to pass all the estate which the grantor could lawfully convey by a deed of bargain and sale.” MCL 565.3. “It is settled law in this State that a quitclaim deed transfers any interest the grantor may have in the lands, whatever its nature.” Roddy v Roddy, 342 Mich 66, 69; 68 NW2d 762 (1955). They are valid and recorded every single day in Michigan.
That being said, quitclaim deeds are typically used for transactions where the parties know each other. The familiarity and certain level of trust reduces the risk of the grantee receiving the property from unforeseen claims. Very often, these quitclaim deeds are used in circumstances where little or no money is exchanged, so these deeds will often say “No Consideration” or “For Consideration of $1.00”. Quitclaim deeds are often used in the following circumstances:
- GIFTS: The grantor quitclaims his or her interest away in the property to a friend, a church or even a charity for no money in exchange. When consideration is under $100.00, the transaction is exempt from state and county transfer taxes. MCL 207.526(a); MCL 207.505(a).
- TRANSFERS AMONG FAMILY MEMBERS: The quitclaim deed is often used to transfer property between spouses, between parents and children, between siblings or between other close relatives sometimes across two or more generations. When transactions occur between certain relatives, the transaction may be exempt from state and county transfer taxes. MCL 207.526(i)-(k); MCL 207.505(i).
- CORRECTING DEFECT IN TITLE: A quitclaim deed is often recorded to correct a flaw in a previous title already on record with the register of deeds including an erroneous legal description or misspelled names. A quitclaim deed recorded to correct a title flaw is exempt from state and county transfer taxes. MCL 207.526(n); MCL 207.505(l).
- TRANSFERS PURSUANT TO COURT ORDER: A quitclaim deed is often used when a judgment or order of a court makes the grantor transfer the property. For example, a spouse may be ordered to convey his interest in the marital residence to the other spouse incident to a divorce judgment. A transfer pursuant to court order is exempt from state and county transfer taxes unless a specific monetary consideration is ordered. MCL 207.526(l); MCL 207.526(j).
- TRANSFERS TO GRANTOR TRUSTS: A quitclaim deed is often used by a grantor transferring real estate to a living revocable trust of his or her creation for no consideration. When consideration is under $100.00, the transaction is exempt from state and county transfer taxes. MCL 207.526(a); MCL 207.505(a).
- DEED FROM TAX FORECLOSURE AUCTION: A buyer of property at a tax foreclosure auction will typically receive a quitclaim deed from the foreclosing state or municipal government that had originally seized the property for taxes.
- DEED IN LIEU OF FORECLOSURE: In some cases, a homeowner will avoid a mortgage foreclosure from a bank (and therefore avoiding a huge credit score hit) by quitclaiming their interest in the property to the bank before the foreclosure can be completed (provided that the bank agrees to this transaction).
- DEEDS FROM FIDUCIARIES OF TRUSTS AND ESTATES: A person who inherits property from a trust or estate will receive a fiduciary deed signed by the personal representative or trustee, but these deeds are usually quitclaim deeds anyway because they contain no warranties whatsoever since the fiduciary typically has little to no personal knowledge about the property.
Quitclaim deeds are exempt from the requirement that they must be accompanied by a certificate from the county treasurer stating whether there are tax liens on the property and that all taxes due have been paid. MCL 211.135(6)(e). The buyer takes the risk that there may be outstanding property taxes on the property, or that it may even be the subject of a tax forfeiture or foreclosure action.
Is a quitclaim deed a good idea for your property transaction? There can be significant legal consequences for electing to forego the covenants that come with a warranty deed. You should seek out the advice and knowledge of a skilled property lawyer to ensure that your real estate transfer is handled correctly under the circumstances.
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.